Creditor’s Rights in Bankruptcy: Attending a 341 Hearing
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In every bankruptcy case, the debtor is required to attend a hearing to answer questions about the bankruptcy filing. This hearing is called a meeting of creditors, or a 341 hearing (after the section of the bankruptcy code that requires it). As the name suggests, creditors are also allowed to attend this meeting.

Although most creditors choose not to attend the 341 hearing, it may sometimes be a good idea to do so. If the debtor has misstated the amount due to a creditor or listed information in their bankruptcy filings that differs from the creditor’s records, it may be wise to attend and question the debtor.

What Happens at a 341 Hearing?

At a 341 hearing, the debtor answers questions about their bankruptcy filing under oath. In every case, a bankruptcy trustee will be present and ask the debtor questions about the accuracy of their filings and whether other assets are available. The bankruptcy trustee is a lawyer appointed by the court to represent the interests of creditors. However, specific creditors or their attorneys may also question the debtor.

The exact format of the hearing depends on the case. In a simple consumer bankruptcy, where the debtor is an individual whose incomes, assets, and debts are fairly ordinary, the hearing is usually less than ten minutes. Trustees usually have a lot of cases to handle, so they don’t devote too much time to most bankruptcies unless the case is unusually complicated. If the debtor is an individual with an unusually complicated financial situation or a business, the meeting will usually be longer and more thorough.

Although the trustee will ask general questions of the debtor, such as whether they made luxury purchases or forgot to list any assets on their bankruptcy schedule, the trustee may not be familiar with a specific debtor’s circumstances. If a creditor knows something that contradicts the debtor’s bankruptcy filings, it’s a good idea for the creditor to attend the hearing to ask the debtor about it.

Creditors should be sure to keep all documents from their dealings with a debtor. A lawyer can help go over these documents and detect any inconsistencies with the debtor’s bankruptcy filings. For example, if a debtor claimed to have certain income or assets when applying for a loan but then didn’t list that income or asset on the bankruptcy schedule, the creditor should attend the meeting to ask the debtor about the inconsistency. Such questions might uncover extra money that can be used to pay the creditor. If the questions expose intentionally fraudulent conduct by the debtor, the court may even deny discharge of the debt.

In some cases, the debtor’s lifestyle might suggest that they have hidden assets. In the rapper 50 Cent’s 2016 bankruptcy case, a judge asked him about piles of cash he posed with in Instagram photos. Ultimately, he admitted the money was fake and his bankruptcy succeeded, but his creditors might have been able to increase their recovery if it had been real.

Both debtors and creditors have the right to be represented by an attorney at a 341 hearing. It’s usually a good idea for a creditor to be represented by an experienced bankruptcy attorney who can phrase questions in a way that requires the debtor to answer directly. It’s especially important for a creditor to be represented if the debtor is also represented.

Other Options for Questioning a Debtor

Bankruptcy trustees are almost always assigned to multiple bankruptcy cases. As a consequence, trustees can only devote a limited amount of attention to each case. This means that in most consumer bankruptcy cases, the 341 hearing is very short and may not leave enough time for the creditors to ask every question they want to.

Fortunately, the rules of bankruptcy procedure allow creditors additional options for questioning debtors who make inconsistent statements. The options are in addition to, not a replacement of, a 341 hearing. A creditor can both attend a 341 hearing and pursue these additional options.

Rule 2004 allows a creditor, with the court’s approval, to compel the debtor to appear and answer additional questions under oath. This option is useful in cases where a complicated situation needs to be untangled.

A 2004 hearing can also be used to compel the debtor to produce documents or to question a witness other than the debtor. If another witness, like a family member of the debtor, is key to the case but not a party to the bankruptcy, it’s important to schedule a 2004 hearing because these witnesses will not be present at a 341 hearing.

At a 2004 hearing, the debtor or other witness will take an oath to tell the truth and answer questions in front of a court reporter. To get the best results, it’s a good idea to have an attorney ask the questions. An experienced attorney will know how to phrase questions in a way that doesn’t allow the debtor to dodge them.

Creditors can also send written questions to debtors under Rule 7033. This is a useful option when a creditor needs additional information but doesn’t want to go to the trouble of a full hearing. A lawyer can write the questions to make sure the debtor provides exactly the information the creditor needs.

A creditor should seek help in deciding which options to use to get information from a debtor. The 341 hearing, 2004 hearing, and 7033 written questions all have their advantages and drawbacks, and an experienced bankruptcy attorney will know which ones a creditor should pursue and the options that they have available.

What Should I Do if Someone Who Owes Me Money Files for Bankruptcy?

If someone who owes you money files for bankruptcy, contact Rosenblum Law for a free consultation. Bankruptcy affects your rights as a creditor and may prevent you from receiving what you are due. Skilled representation can make a difference in how much you are able to collect. Call 888-815-3649 or email us today.

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