What is the Section 341 Meeting?

Austin, Texas, Board Certified Bankruptcy Lawyer

Section 341 Meeting

In every bankruptcy case, the debtor is required to make one appearance at a "creditor’s meeting." The creditor’s meeting (also called a “341” meeting) for any given case will be grouped with approximately 30 other similar cases. The group of cases commonly referred to as a "trustee panel" of cases, is given to a single trustee. The court will issue a notice specifying the date and time of the meeting. The meeting can not be scheduled at the convenience of the debtor or his attorney. You must attend the meeting on the scheduled date and time. If you can not attend on the scheduled date, the trustee will normally agree to reschedule the meeting at least once. However, the new meeting date will be reset to one of the next available trustee panels for that particular trustee.

Your creditor’s meeting will be scheduled between 20 and 50 days after you file your petition. The creditor’s meetings for Chapter 7 bankruptcy cases filed in Austin are held at the Homer Thornberry Judicial Building located at the corner of San Jacinto and 9th Street. The creditor’s meetings for Chapter 13 bankruptcy cases filed in Austin are held at the Homer Thornberry Judicial Building located at the corner of San Jacinto and 9th Street. In consumer cases, most meetings last 5 minutes or less. In complex or contentious cases the meetings can last 30 minutes or more.

The Chapter 7 panel trustee or the Chapter 13 Trustee will preside at the creditor’s meeting. The first thing the trustee will do is administer an oath to you. After that, you are testifying under penalty of perjury. He or she will review your driver’s license and social security card to verify your identification. He will examine your tax returns and bank statements. He will ask you questions about your property and debts. The trustee will ask questions to determine whether you have any non-exempt property, and if so, whether the property is valuable enough for the bankruptcy estate to realize a substantial dividend for creditors? In other words, do you own sufficient non-exempt property to justify taking it, selling it, and distributing the proceeds to creditors? The trustee will also ask questions directed at verifying whether you have disclosed all of your property and debts, and the accuracy of the estimated values given for the property.

Failure to respond or not respond truthfully can result in the petition being dismissed or, in extreme cases, a charge of perjury. Creditors have been notified that they may attend and question the debtor about the assets of the debtor or any other matter relevant to the bankruptcy. A creditor doesn’t waive any rights by not attending the creditors meeting.

U.S. Trustee Representative may appear

In Chapter 7 bankruptcy cases, in addition to the Chapter 7 panel trustee, a representative from the United States Department of Justice Office of the United States Trustee (U.S. Trustee) may be present at your meeting of creditors. The main focus of their inquiry is normally directed at whether the debtor is abusing the bankruptcy process by filing under Chapter 7 instead of proposing a repayment plan under Chapter 13. There are many ways that a debtor can be deemed to have abused the bankruptcy process. However, the primary consideration is usually whether the debtor’s budget shows that he can afford to pay at least some of the unsecured debt.

Most court opinions on the subject agree that if the debtor’s monthly income exceeds his or her reasonable monthly expenses to any significant degree, the case should be dismissed as an abuse of the bankruptcy process. The only way to avoid this result is if the debtor’s reasonable monthly expenses, as shown on the budget submitted to the court, equal or exceed monthly income. High income debtors (doctors, lawyers, engineers, etc.) attempting to file under Chapter 7 pose a much greater challenge for the debtor’s attorney, and have a much higher risk of drawing scrutiny from the trustee.

Creditors May Appear

All creditors are invited to attend and ask the debtor questions about his debts and assets. In the vast majority of all cases, no unsecured creditors appear at the meeting. Unsecured creditors normally come to the meeting only if they believe that the debtor is guilty of misconduct sufficient to warrant a denial of discharge. The only creditors that will normally appear with any frequency at a creditor’s meeting are secured creditors seeking to determine the debtor’s intentions with respect to their collateral, and whether the debtor will sign a reaffirmation agreement. Creditors have 60 days after the 341 meeting to file any complaints they may have to the dischargeability of your debts.

 The Bankruptcy Code requires that you reaffirm your car loan within 45 days after the "341 meeting." The Bankruptcy Code does not give you the option of continuing your car payments without reaffirming the loan. Provisions in security agreements often say that bankruptcy is an event of default. These so called “ipso facto” clauses used to be unenforceable but are now allowable. Therefore, if you do not reaffirm a debt secured with a lien against property you want to keep following the bankruptcy, the creditor may be able to legally repossess the property even if you are current on your payments. Once the loan is reaffirmed, if you default on your payments and the car is repossessed, you are liable for the repossession deficiency.

You also have the option to redeem the car within 45 days of the "341 meeting." This means that you have to pay the entire balance due within that time. Because most debtors do not have that kind of money, this option is rarely used.

If you decide to reaffirm a debt, you are required under the Bankruptcy Code to file an agreement with the court. The agreement must disclose that you were advised of the amount of the debt you are reaffirming and how it was calculated and that you are aware that the debt will not be discharged. You must indicate your income and expenses so that the court can see that there is sufficient money to pay the reaffirmed debt. Unless you are represented by an attorney, the court must approve the agreement. A hearing will be held if the court disapproves. If an attorney represents you, he or she must certify in writing that they advised you of the legal consequences of the agreement, that you were fully informed and entered into the agreement voluntarily, and that the reaffirmation will not create an undue hardship on you and your family.

Most Bankruptcy Cases Are “No Asset” Cases

In most cases, at the conclusion of the creditor’s meeting, the trustee will announce that he will allow the exemptions claimed by the debtor, abandon all non-exempt property, and close the case as a "no asset" case. This means that the trustee is satisfied that the debtor does not have any assets worth administering and the debtor has not abused the bankruptcy process. The trustee’s investigation will then end.

In a small portion of cases, at the conclusion of the creditor’s meeting, the trustee will announce that he intends to keep his file open and continue the investigation. If the Chapter 7 bankruptcy trustee believes that significant non-exempt assets may be available for creditors, he or she will keep the case open and further investigate the debtor’s assets. This could include requesting additional documents from the debtor, a personal inspection of assets, or any other action the trustee believes is necessary to properly investigate the debtor’s assets.

Motion to Dismiss may be Filed

If the U.S. Trustee believes that the bankruptcy filing might be abusive, the Chapter 7 panel trustee may keep the case open to further investigate the debtor’s budget. If there is a question concerning the accuracy of any income or expense numbers on the budget, he may request the debtor to provide proof that they are accurate. If the U.S. Trustee believes that the case is abusive he has the option to file a motion to dismiss the case. If your income is less than the median income for a family of your size living in your state only the U.S. Trustee or the court on its own initiative may request a case to be dismissed as an abusive filing. If you are an above median income debtor then creditors and other parties in interest may file a motion to dismiss your case as an abusive filing as well.

The court will conduct a hearing if a motion to dismiss your case is filed. The U.S. Trustee or other movant and the debtor will be able to present evidence at the hearing. If the court believes that the filing was abusive, the debtor will normally have two options: (1) convert the case to a Chapter 13 case, and propose a plan to repay some or all of the unsecured debt; or (2) the case will be dismissed. If the case is dismissed, the debtor will be back in the same position he was in before the case was filed.

Objection to Discharge or Dischargeability of Debt may be Filed

Each type of bankruptcy allows creditors to object to specific debts included in the plan or the manner in which the plan addresses the repayment or discharge.

In Chapter 7 Bankruptcy, creditors generally have 60 days after the first creditors meeting to object to the discharge of a specific debt or an objection to the discharge of all of the debts. If no objections are filed, the court will issue the discharge order and the trustee will proceed to collect and sell the assets, then distribute the proceeds to the creditors under a predetermined system. If there are objections, the bankruptcy itself, less the objected debts, continues through to discharge. It may be necessary to have a trial before a judge to resolve the items that creditors objected to. A discharge contest must allege specific misconduct on the part of the debtor justifying the denial of a discharge. If a timely discharge contest is filed, the bankruptcy case will be kept open until the discharge contest has been decided. Discharge contests are rare.

In a Chapter 13 case, creditors are given an opportunity to object to the plan for repayment. If there are no objections filed by creditors or the trustee, the plan may be confirmed as filed. After the plan is confirmed, the trustee will distribute the payments from the debtor to creditors until the plan is completed. Upon completion of the Chapter 13 plan, the court will issue a discharge order, the trustee will prepare a final report, and the case will be closed.

Discharge Normally Granted 60 Days after Conclusion of Creditor’s Meeting

After the creditor’s meeting is adjourned, the debtor is waiting for the passage of time until the court enters a discharge order. If neither a dismissal motion nor discharge contest are filed, the court will enter a discharge order declaring that all of the debts have been discharged (i.e. released, forgiven). The discharge order will normally be issued approximately 60 days after the creditor’s meeting is first scheduled. At the same time the court issues the discharge order, it will also normally issue and order closing the case. The order closing the case is the last event that will occur in the case.

Debtor’s Responsibilities after Conclusion of Creditor’s Meeting

Generally, the only responsibilities you have with respect to the bankruptcy after the 341 meeting is to cooperate with the trustee in providing any requested information.

Free Consultation: Contact Board Certified bankruptcy attorney Fred E. Walker in Austin, Texas, for a debt relief consultation. There is no cost or obligation.