Typical Questions Asked at the Chapter 7 Meeting of Creditors

The Meeting of Creditors is typically the only mandatory appearance most debtors will have to make in their bankruptcy proceeding. While it is a short and usually uneventful occurrence, it is a court hearing nonetheless and all answers are provided under oath and must be truthful and accurate. The bankruptcy trustee assigned to the case will call each case by the debtor’s name, verify the identity of each debtor with their driver’s license and social security card, check any other documents that were requested to be provided at the Meeting (for example, recent post-petition paystubs and file date bank statements), swear-in each debtor under oath to provide truthful testimony under the penalty of perjury, and then ask a series of mostly yes-no questions. Many questions asked at the Meeting of Creditors will repeat information that was already disclosed in the bankruptcy petition and schedules.

These are some of the common questions asked by the Chapter 7 trustee at the Meeting of Creditors in Minnesota (note: the questions asked at a Chapter 13 Meeting of Creditors are similar to this list but may be more extensive):

  • State your name and current address for the record.
  • Have you read the Bankruptcy Information Sheet provided by the United States Trustee?
  • Did you sign the petition, schedules, statements, and related documents that were filed with the court?
  • Did you read those documents before you signed them?
  • Are you personally familiar with the information contained in those documents?
  • To the best of your knowledge, is the information contained in those documents true and correct?
  • Are there any errors or omissions to bring to my attention at this time?
  • Are all of your assets identified on the schedules?
  • Have you listed all of your creditors on the schedules?
  • Are you married? Have you ever been married? If you are recently divorced, the trustee may also ask if you have any money or property still owed to you from the divorce.
  • Have you ever filed for bankruptcy before? If yes, when, where and what type?
  • Are you employed in the same job as when you filed bankruptcy?
  • Do you have a domestic support obligation, such as child support or alimony?
  • Do you own or have any interest whatsoever in any real estate? If yes, you may also be asked when did you purchase the real estate, did you take any equity out of the property in the past five years?
  • Have you given away any property or given any property within the last two years? If yes, what did you sell, how much was it worth and to whom did you sell it?
  • Do you have a claim against anyone or any business?
  • Are you the plaintiff in any lawsuit?
  • Do you have the right to sue anyone in a lawsuit?
  • Does anyone owe you money?
  • Has someone died and left you an inheritance? The trustee may also mention that if anyone dies in the next six months and you inherit something, it could become “property of the estate”. This means that you must report any such inheritance to your attorney and to the court.
  • In the 90 days prior to filing bankruptcy, did you pay any one unsecured creditor more than $600?  If yes, the trustee may want to know how much you paid total, to whom and may request to see copies of the checks/payments.
  • In the past six years, have you run any business? If yes, the trustee may ask questions about the nature of the business, what assets the business owns and what happened to the business if it is no longer operational.

Keep reading for more information on What Happens after the 341 Meeting of Creditors is Over

Located in Edina, Minnesota, Lynn Wartchow represents consumer bankruptcy clients in Chapter 7 and Chapter 13 filings in Minneapolis, St. Paul, Ramsey and Hennepin County, and throughout Minnesota.

What Happens after the 341 Meeting of Creditors is Over?

The answer to this depends on whether you have filed Chapter 7 or Chapter 13 bankruptcy. (Chapter 11 individual debtors also are required to attend a Meeting of Creditors). At a minimum and for all Chapter 7 and Chapter 13 cases, the debtor must take the second financial management course and file the certificate with the Bankruptcy Court. The Notice of the Meeting of Creditors will give a specific deadline for filing the certificate in a chapter 7 case (the certificate can be filed anytime up to the week prior to the discharge being received) while in chapter 13 the certificate may be filed at any time before their chapter 13 Plan is complete.

In most Chapter 7 cases, attendance at the Meeting of Creditors which occurs about one month after your case is filed, is the last active event for a debtor in a bankruptcy proceeding. Once the Chapter 7 trustee has concluded the Meeting of Creditors and determined that no additional questions or documents will be needed from the debtor, the debtor only has to complete the second financial management course and wait for their Chapter 7 bankruptcy discharge to be entered by the Bankruptcy Court about two months later. A Chapter 7 case is held usually open for two months after the date of the Meeting of Creditors so that certain actions can be taken in a case. Although these post-Meeting of Creditors actions are somewhat uncommon in the garden-variety Chapter 7 case, potential actions include turnover of a non-exempt asset to the Chapter 7 trustee, a creditor objection to the discharge of a particular debt (which is a common type of adversary proceeding), motions to dismiss a case brought by the attorney for the Office of the United States Trustee, or an administrative audit of the Chapter 7 case. Your Chapter 7 attorney can advise you of the potential actions and other requirements you may expect to occur after the Meeting of Creditors in your bankruptcy case, if anything. However most of the time once the Meeting of Creditors is over, it’s just a matter of waiting for your discharge without any further action required other than completing the financial management course.

In Chapter 13 bankruptcy, the Chapter 13 plan is often confirmed about one month after the Meeting of Creditors is concluded. While plan confirmation requires an additional court hearing, attendance is rarely required at the confirmation hearing and you should not plan to attend unless your attorney advises you to do so. Once confirmed, the Chapter 13 debtor must continue to make all Chapter 13 plan payments as well as any other requirements set forth under the terms of their confirmed Chapter 13 plan (such as to report any bonus income received during the plan to the Chapter 13 trustee or provide income tax returns each year). Since a Chapter 13 case will remain an active bankruptcy case while the plan is underway, there are a number of events that can arise after the Meeting of Creditors that require you’re your and your attorney’s involvement. For example if during the course of the Chapter 13 plan there are significant changes to income or expenses, your bankruptcy attorney may advise you to file a motion to convert to Chapter 7 rather than stay in Chapter 13. Also, if you move or change your address you must notify your attorney.

Located in Edina, Minnesota, Lynn Wartchow represents clients in Chapter 7 and Chapter 13 bankruptcy in Minneapolis, St. Paul, Ramsey and Hennepin County, and throughout Minnesota.

Managing the Business During Chapter 11: Reporting and Other Requirements

When a business files Chapter 11, it becomes a “debtor-in-possession” of its own affairs as a fiduciary to the bankruptcy estate. What this means is that management of the business during the Chapter 11 case will remain under the control of its prepetition management and principals, subject to certain duties to report and maintain the business in a manner consistent with the procedural rules of Chapter 11 business reorganization bankruptcy. While these mostly financial and administrative requirements for operating the business during Chapter 11 are relatively straight-forward and generally represent good business practices, failure to follow these requirements can result in an appointment of a trustee to takeover operations of the business or dismissal or conversion of the case to liquidation.

While the business is in Chapter 11 bankruptcy, it has an obligation to file both a comprehensive initial financial report as well as ongoing monthly operating reports. The monthly operating reports provide an itemization of cash receipts and disbursements, profit and loss statement, balance sheet, copies of all bank account statements and other financial information that facilitates an ongoing review of the debtor’s finances while it is in bankruptcy. These monthly operating reports may be reviewed by any party in interest to the case and also form a basis to determine the feasibility of a plan of reorganization. If the debtor continually sustains a monthly net loss as demonstrated on the monthly operating reports, its hope for reorganization may be diminished.

Additionally, the business debtor must also stay current in the filing of all applicable tax returns and payment of taxes, including monthly sales tax and employee withholding tax obligations. This may be a challenge for businesses that do not maintain regular accounting books and records, or may routinely default in the payment of taxes. If the business accounting records and tax reporting is not current or accurate prior to the Chapter 11 being filed, an effort should be made as soon as possible to arrange the resources necessary to ensure that correct and timely tax filing and payments are made as soon as the Chapter 11 is filed. Tax obligations accrued prior to the bankruptcy may be dealt with in the plan, which often means that pre-petitiion sales tax obligations in Chapter 11 are repaid over five years at low interest.

The Chapter 11 business debtor has additional requirements to these, including the requirement to immediately open new debtor-in-possession bank accounts and close all pre-petition bank accounts, to maintain all insurance standard in the debtor’s particular industry, to pay a quarterly fee to the Office of the U.S. Trustee that monitors the debtor’s finances throughout the Chapter 11 proceeding, to attend various interviews and hearings conducted by the U.S. Trustee, as well as adhere to other restrictions on compensation, partner distributions, use of cash and more.

Keep reading for more on the Chapter 11 process, timeline and fees involved in a reorganization.

A qualified Chapter 11 attorney can advise your business of all the requirements and obligations before a Chapter 11 bankruptcy case is filed. Wartchow Law Office provides initial Chapter 11 consultations to review the business liabilities and other circumstances affecting a possible Chapter 11 bankruptcy proceeding, and to advise on possible options and solutions that Chapter 11 can provide to keep a business operating and improve future prospects.

The Role of the “Trustee” in Chapter 11

Unlike under other Chapters of the Bankruptcy Code, Chapter 11 is unique in that there is no initial appointment of a trustee. In contrast, an independent trustee is appointed in a Chapter 7 business bankruptcy to manage the business operations if the business is still operational and effectuate an orderly liquidation. However in Chapter 11 where the intent of the bankruptcy proceeding is to reorganize, having an independent trustee manage the business operations is often expensive, unnecessary and even counterproductive to the reorganization process. After all, the principals of a business are usually the best suited to run their own business and continuity of current management typically minimizes overhead costs, best maintains vendor and client relationships and operates the business in its most efficient manner. The appointment of a trustee in a Chapter 11 case can be akin to a death sentence if the trustee appointed decides to unseat the current management or principals and/or to convert the business to Chapter 7 liquidation.

While somewhat uncommon here in Minnesota, a Chapter 11 bankruptcy trustee or examiner can be appointed under specific circumstances, usually when the principals of a Chapter 11 debtor have utterly mismanaged the debtor’s finances and business. The appointment of a trustee or examiner in a Chapter 11 business reorganization must be made by request of a party in interest—usually that party is the attorney for the United States trustee—and must be based on one of the grounds recognized under the Bankruptcy Code, including for fraud, dishonesty, incompetence, or gross mismanagement of the affairs of the debtor by current management, either before or after the commencement of the case. Appointment of a trustee in a Chapter 11 case is an extraordinary consequence and generally should be avoided. The best plan to avoid the appointment of a trustee in Chapter 11 is to follow the rules and procedure, read and observe the Operating Guidelines and Reporting Requirements of the U.S. Trustee (as well as follow all Reporting and Other Requirements in Chapter 11), and always ask your Chapter 11 attorney before doing anything that may be outside the ordinary course of business.

Lynn Wartchow is a Minnesota Chapter 11 attorney advising business clients on their options and Chapter 11 solutions to keep a business operating and improve future prospects. Located in Edina, Minnesota, Wartchow Law Office represents clients throughout Minneapolis, St. Paul and surrounding areas in Minnesota.

Defined: The Bankruptcy “Trustee” and the “United States Trustee”

The terms “trustee” and “United States Trustee” sound similar and often encompass similar objectives, however the role of the trustee in bankruptcy proceeding is distinctly different than that of the United States Trustee.

The “United States Trustee” (also called the U.S. Trustee or “UST”) is essentially a federal office within the U.S. Department of Justice that oversees the administration of all bankruptcy cases in a certain district. Here in the district of Minnesota as in other districts, the office of the U.S. Trustee employs a group of staff attorneys, financial analysts and other professionals all charged with the responsibility to promote the efficiency and protect the integrity of the federal bankruptcy system. The Office of the US Trustee does not always directly engage in consumer Chapter 7 and Chapter 13 bankruptcy proceedings, however does monitor each case to determine whether legal action needs to be taken in order to enforce the requirements of the Bankruptcy Code and to prevent fraud or abuse. The UST often reviews petition and schedules filed with the Court to determine whether fraud exists or if an audit must be conducted to uncover more information. However in the majority of consumer Chapter 7 and Chapter 13 bankruptcy cases, the individual debtors will never hear from the United States Trustee or be subject to its action. In Chapter 11 cases, the Office of the US Trustee becomes a principal player in monitoring the business reorganization proceeding.

In contrast, the “trustee” (also called a “panel trustee” or a “standing trustee” in Chapter 13 cases) is often a private attorney charged with the responsibility to administer a bankruptcy, hold the meeting of creditors, and distribute any non-exempt assets to creditors. A bankruptcy trustee is appointed to every individual’s Chapter 7 or Chapter 13 consumer bankruptcy case. In the District of Minnesota, there are approximately 25 such attorneys that serve as Chapter 7 and Chapter 13 trustees. Unlike the US Trustee whose main objective is to ensure the integrity of the bankruptcy process, the role of the Chapter 7 trustee is to collect any non-exempt assets of the debtor, liquidates those assets, and then distribute the proceeds to creditors. In Chapter 13, the trustee additionally evaluates the debtor’s financial affairs, makes recommendations to the Court with regard to the Chapter 13 plan and ultimately administers a the Chapter 13 plan by collecting payments from the debtor and disbursing the funds to creditors. In Chapter 11, no trustee is initially appointed and the debtor effectively operates as its own trustee, i.e., the “debtor in possession”.

Lynn Wartchow is the founding attorney of Wartchow Law Office located in Edina, Minnesota and representing consumer and business clients in Chapter 7, Chapter 13 and Chapter 11 bankruptcy proceedings throughout the Minneapolis and St. Paul and surrounding areas.