Thomas F. Eagleton Federal Courthouse

Date

The creditor’s meeting is normally held between 30 and 45 days after the bankruptcy petition is filed. The meeting can never be scheduled at the convenience of the debtor or his attorney. The court will issue a notice specifying the date and time of the meeting. The debtor must attend the meeting on the scheduled date and time. If the debtor 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. The trustee will never agree to appear at the courthouse and conduct a meeting for a single case.

Length of Meeting

In consumer cases, most creditor’s meetings last 5 minutes or less. In complex or contentious cases the meeting can last 30 minutes or more. The meeting for each successive case on the panel will be scheduled to start every 5 minutes.

Presiding Officer - Who Comes to Meeting?

The Chapter 7 trustee will preside at the creditor’s meeting. All creditors are invited to attend and ask the debtor questions about his debts and assets. In 99 percent of all cases, no unsecured creditors will 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.

Focus of Trustee’s Investigation

The trustee will begin the meeting by asking the debtor various questions about his debts, assets and budget. The trustee’s questions are normally focused on two areas:

(a) Sufficient Property to Administer? Does the debtor have any non-exempt property, and if so, is the property valuable enough for the bankruptcy estate to realize a substantial dividend for creditors? In other words, does the debtor own sufficient non-exempt property to justify taking it, selling it, and distributing the proceeds to creditors. The trustee may ask questions directed at verifying whether the debtor has disclosed all of his property, and the accuracy of the estimated values given for the property.

(b) Substantial Abuse of Bankruptcy Process? The trustee’s second major focus 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 main inquiry is usually whether the debtor’s budget shows that he can afford to pay at least some of the unsecured debt. If the debtor’s income exceeds her monthly expenses, the trustee may conclude that the debtor is abusing the process by attempting to discharge her debts without making any payment, rather than proposing a repayment plan under Chapter 13.

Most court opinions on the subject agree that if the debtor’s monthly income exceed 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.

Conclusion of Meeting

(a) No-Asset / No Abuse 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.

(b) Asset or Abuse Cases. 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. This can be done for several reasons:

Potential Asset Recovery for Creditors

If the trustee believes that significant non-exempt assets may be available for creditors, he 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.=

Abusive Filings

If the trustee believes that the bankruptcy filing might be abusive, he 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 trustee, after further investigation, believes that the debtor can afford to repay a portion of the unsecured debt, he will refer the case to the U.S. Trustee’s office for a second review. If the U.S. Trustee agrees that the case is abusive, he has the option to file a motion to dismiss the case. Under current law, the U.S. Trustee or the court on its own initiative, are the only persons that may request a case to be dismissed as an abusive filing. Neither the panel trustee nor any creditor are entitled to file a motion to dismiss a Chapter 7 case as an abusive filing.

Dismissal Hearing

If the U.S. Trustee files a motion to dismiss the case, the court will conduct a hearing. The U.S. Trustee 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: (a) convert the case to a Chapter 13 case, and propose a plan to repay some or all of the unsecured debt; or (b) 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.

Discharge Contest

A discharge contest is a lawsuit filed by a creditor or panel trustee seeking to prevent the debtor from receiving a discharge of one or more debts. A discharge contest must be filed within 60 days after the creditor's meeting is first scheduled to start. The trustee and all creditors are legally prohibited from filing a discharge contest after the 60 day time period.

A discharge contest must allege specific misconduct on the part of the debtor justifying the denial of a discharge. See the page entitled "Non-Dischargeable Debts" for a summary of the various forms of misconduct which will justify denial of a bankruptcy discharge. If a timely discharge contest is filed, the bankruptcy case will be kept open until the discharge contest has been decided.

Most discharge contests are filed by a single creditor claiming that the debtor should not receive a discharge of the debt owed to him. For cases filed by my office during 2000 and 2001, the average likelihood of a drawing a discharge contest from a creditor has been about 2 or 3 percent. This is up from about 1 percent or less in prior years. It is unusual to get more than one discharge contest in any given case. In the over 1,000 cases handled by my office, I have only encountered one case in which more than one creditor filed a discharge contest in the same case.

The panel trustee has a right to file a discharge contest which seeks to completely bar the debtor from receiving a discharge of all debts. This type of case is very unusual indeed. I have never encountered such a case.

Discharge Order

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.