341 Creditors Meeting -

     In each bankruptcy chapter, the debtor must attend a "meeting of creditors". He is accompanied by his attorney, if he has one. This is also known as a "Section 341 meeting", because it is found in Section 341 of the Bankruptcy Code. It is usually held about 3-4 weeks after the bankruptcy case is filed. This meeting is not a judicial hearing, and the bankruptcy judge is not allowed to attend. It is usually held in a conference room at the local federal building.

Who Conducts the Meeting?

     The meeting is conducted by the trustee in the case; in the case of Chapter 11, it is conducted by a representative of the Office of the U.S. Trustee.

Purpose of the Meeting

     The purpose of the meeting is for the trustee and the creditors to have an opportunity to question the debtor about the debtor's assets, liabilities, and any matter which may relate to debtor's right to a discharge. The presiding officer (the trustee) is required to tape-record the meetings. These tapes (or CDs or DVDs) are available for purchase thereafter by any interested party, for a nominal fee.

The Start of the Meeting

     The meeting starts by the debtor being put under oath, i.e., promising to tell the truth, the whole truth, and nothing but the truth. He is then required to show the trustee a current driver's license or other picture identification. He is also required to show proof of his social security number. This is usually done by showing one's social security card, or by a recent IRS tax form, like a W-2 or 1099. In the typical Section 341 meeting, very few creditors actually ever attend. It usually ends up being the trustee and perhaps a trustee's assistant, the debtor, and the debtor's attorney. In some areas, it may be customary for the IRS to send down a representative, in cases in which there are extant tax liabilities. Sometimes, if a case is bitterly contested, there may be attendance and questioning by an ex-spouse or ex-business partner. Creditors can appear in person, or through their own lawyers.

How Long Does the Meeting Last?

     The meetings usually last for only 5 to 10 minutes. In complex or heavily contested cases, they can go on for a 1/2 hour to an hour. The trustee will often schedule the meetings in the cases which he or she is assigned, such that there may be 5-6 meetings every 2 hour, starting at 9 am and going to 4:30 PM. It is not unusual in a given day for the trustee to conduct 10 meetings per hour, over a 7-hour stretch, for a total of 70 meetings per day. This provides an efficient mode of administration of the cases.

What Questions does a Trustee Usually Ask?

     The trustee usually has his or her own standard questions for the debtor. For example:

Did you sign the original bankruptcy petition and the schedules? Did you review the petition and schedules before you signed them? Are the petition and schedules true and correct, to the best of your knowledge? Did you list all of your assets? Did you list all of your debts? Is there anything in the petition or schedules that needs to be amended? Do you have the right to sue anyone for anything, such as an auto accident, wrongful termination from employment, slip and fall, or otherwise? Do you own any real estate in any other state or country? Do you expect to inherit any property within the near future, or have you inherited any property since the date of the bankruptcy petition filing? Has your employment situation changed since the filing of the case.

Creditors Attending the Meeting

     Creditor attendance is not frequent. However, a creditor attending the meeting often will question the debtor about that particular debt. For instance, if a credit card representative appears, he may have questions relating to the use of the credit card just prior to the filing, perhaps to gather information to support a non-dischargeability complaint for fraudulent use of the card. Or, the creditor may have been given a financial statement years ago, listing certain assets, and which are not shown on the debtor's schedules. He may ask the debtor what happened to those assets, just to make sure that there were no fraudulent conveyances or other improper transfers.

The Debtor's Attorney

     At the 341 meeting, the debtor's attorney is allowed to confer with and advise his client. Some trustees try to limit the right of the attorney to do so. However, the proceedings are not in a courtroom and the debtor is not on the witness stand, and the attorney has the right and the duty to advise and consult with his client. Since the proceedings are of a more informal nature, often the questioners are not familiar with the rules of evidence and unskilled in framing a proper question. For instance, a question may be compound, vague, be without proper foundation, assume facts not in evidence, or seek to violate the attorney-client or other privilege. In these cases, a competent debtor's attorney will want to make sure that the questions are properly presented, so that the debtor can have a fair opportunity to answer.

Taking the 5th Amendment

     In some rare cases, it may become advisable for the client to invoke his 5th Amendment right not to incriminate himself. In such an instance, the attorney will advise the client to take the 5th, and not answer the question. This is absolutely permissible, and the attorney should inform himself as to these rights of his client should the situation call for it. It may be prudent to seek the advice of an experienced criminal defense attorney in this regard.

Conclusion

     In conclusion, the Section 341 meeting is an archaic holdover from former days when the trustee and creditors did not have much information about the debtor's case, and needed to ask questions in person. In most cases now, however, nothing new or different comes up at these meetings. All of the information has previously been provided in the form of the debtor's detailed schedules of assets and liabilities, and statement of financial affairs. Plus, prior to the meeting, the trustee (and the creditors) will have already had access to the debtor's tax returns and recent paystubs. Some experts are in favor of eliminating these meetings as being superfluous. However, some argue that making the debtor appear at such meeting (even though sparsely attended by creditors), helps to impress upon the debtor the solemnity of the occasion and the need for strict compliance with the disclosure requirements of the Bankruptcy Code.

Relevant 341 and Trustee Articles

Chapter 11 Trustee Chapter 11 Creditors Committee Meeting of Creditors in Chapter 13

Written by Henry Rendler