Bankruptcy By The Numbers: 341 - “You Mean I Have to Meet All My Creditors!?!”

Every bankruptcy case requires certain things of the Debtor filing it: Tell the truth, be complete in disclosing assets and debts, take and finish credit counseling and financial management sessions. One requirement in particular seems to strike more fear into the hearts of consumer debtors: The requirement to appear at the “Meeting of Creditors.” To the uninformed, this sounds like scheduled torture, to be grilled for endless hours, Law and Order style, about how you accumulated all that debt and why you are a bad person for not paying it back.

(Yes you can)

(Yes you can)

Contrary to what Jack Nicholson said in A Few Good Men, you can handle the truth. Section 341 of the Bankrtupcy code does require that there be held a meeting of creditors, and the Debtor must appear at that meeting to be examined under oath. This sounds pretty scary, on its face, but the reality is that most of my clients leave the meeting feeling like their anxiety was greater than the reality warranted.

Here are a few things to remember about your Meeting of Creditors:

  • It is not the same as “Court.” While your examination is subject to the penalty of perjury if untrue, the structure of a 341 Meeting is not as formal as court. No judges are present (they are not allowed to be there, in fact), and the setting is generally more relaxed than what you see on TV or in other courtroom settings.

  • Creditors rarely appear.  While creditors and other parties in interest are entitled to come and ask you questions, they rarely do so. There is little benefit in doing so, since the vast majority of debts are dischargeable (or not dischargeable) without argument. There are exceptions, but for the most part the Trustee serves as a sufficient representative of creditor interests that they don’t have someone there to ask you questions.
  • The Trustee is there to find assets, not make you feel bad.  Keep in mind the Trustee’s job - collect assets to liquidate to give money to creditors (they keep an eye out for fraud and some other matters as well, but I’m assuming my Debtors are generally honest here).  The reasons that led you to file a bankruptcy are more often than not irrelevant to the job the Trustee has, so they don’t spend much time asking about those issues. They want to know if you have assets they can liquidate. If you don’t then it is in everyone’s interest to move quickly on to the next case.
If your attorney has complete information and has done a good job preparing the schedules, many of the questions a Trustee might ask will already be answered before you appear at your Section 341 Meeting of Creditors. Thus an experience bankruptcy attorney can save you additional grief by giving the Trustee enough information to allow the Trustee to move quickly through your case, find whatever assets there are (which your attorney should have already discussed with you), and move your case towards discharge and completion.