Do I have to go to Court if I file for Bankruptcy?

Here's how a bankruptcy case usually works. It is not like a lawsuit where a summons and complaint starts the action, then the defendant answers the complaint, and after that the parties engage in a period of discovery, there may be motion practice, and case progresses toward a trial. In a bankruptcy case, the filing of the petition commences the proceeding and it is usually nonadversarial. The creditors are not required to respond to your bankruptcy petition and the debtor is not heading toward a trial. One of the first appearances that a debtor will have to make is at a meeting of creditors. Let's take a look at chaper 7 case as an example. The debtor files a chapter 7 petition and after the debtor files, a chapter 7 trustee will be appointed to administer the bankruptcy case. The court will provide the debtor and the debtor's creditors with notice of the date and time of what is called "a 341 meeting of creditors". The meeting is named after section 341 of the Bankruptcy Code which requires the meeting to be held. The meeting is typically scheduled 30-60 days after the date of the filing. It is not before a bankruptcy judge but is before a trustee. At that meeting, the trustee will examine the debtor or ask the debtor questions about the information contained in the petition. Despite the name "meeting of creditors", the meeting is usually without creditors because most of the time creditors do not show up. The debtor is sworn in at the meeting and the testimony the debtor provides is under the penalty of perjury. Incidentally, the petition is also signed by the debtor under the penalty of perjury. So, it goes without saying that it is imperative that the debtor's testimony is completely truthful. A deviation from the truth could jeopardize the debtor from receiving a discharge of debts. One of the chapter 7 trustee's most important functions is to determine whether there are any non-exempt assets to liquidate for the benefit of creditors. So, the trustee is looking to see if the debtor has listed all of his or her assets, has accurately valued the assets and has claimed legally appropriate exemptions in connection with assets. The trustee is also determining whether there is any basis to object to the discharge (grounds to object to discharge are discussed in a different blog). Some of the questions a chapter 7 trustee may ask are as follows:

1. Have you filed a bankruptcy before?

2. Did you list everything that you own and everyone that you owe money to on your petition?

3. Did you review your petition with your attorney, and is it true and accurate to the best of your knowledge?

4. Do you owe any child support or alimony?

5. Have you transferred any property in the last several years?

6. Do you expect to inherit any property in the next 6 months?

7. Does anyone owe you any money?

8. Do you have a claim or lawsuit against anyone?

So, in a chapter 7 case, the one appearance you will certainly be required to make is for the section 341 meeting. With the Covid-19 crisis, the meeting of creditors are being held virtually for now. In many chapter 7 cases, this is the only court appearance the debtor will have to make. However, it depends on the case. In a chapter 13 case, there will also be a 341 meeting of creditors. The 341 meeting in a chapter 13 is conducted by the chapter 13 trustee who has different duties than a chapter 7 trustee. One of the most important functions of a chapter 13 trustee is to review the debtor's chapter 13 plan and to collect the monthly plan payments made by the debtor so the trustee can make a distribution to creditors. In addition to the 341 meeting of creditors, the chapter 13 debtor will be required to attend the hearing on confirmation of the chapter 13 plan. However, like the chapter 7 case, depending on the circumstances, the debtor may be required to attend additional hearings beside the 341 meeting of creditors and the confirmation hearing. What is certain is the debtor, whether in a chapter 7 case or a chapter 13 proceeding, is mandated to appear before the trustee at a 341 meeting and if the debtor fails to appear at the meeting, this may be grounds to dismiss the bankruptcy petition.

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