Upon the filing of a petition for Chapter 7 or Chapter 13 relief, a Trustee is identified for the purpose of representing the interests of the unsecured creditors in a particular Chapter 7 or Chapter 13 case. In a Chapter 7 case, the Trustee is referred to as an “Interim Trustee” and will be an Attorney selected from among a panel of approximately 10 Interim Trustees. In a Chapter 13 case, the Trustee is referred to as the “Chapter 13 Trustee.”
Rest assured that the Trustee selected will treat your case and yourself in a highly professional manner. The Trustee is there not to belittle anyone or otherwise try to embarrass the individual they are required to question. Their focus is generally to process the cases as quickly and efficiently as possible in the course of performing their duties under the Bankruptcy Law.
A. Duties of a Chapter 7 Interim Trustee or a Chapter 13 Trustee
B. 341 Meeting of Creditors
C. Chapter 7 Interim Trustee
D. Standing Chapter 13 Trustee
E. Chapter 13 Confirmation Hearing
F. Significance of Chapter 13 Plan Confirmation
A. Duties of a Chapter 7 Interim Trustee or a Chapter 13 Trustee
The duties of a Trustee are set out in the Bankruptcy Code and include:
- Reviewing the petition and schedules
- Presiding over the “341 Meeting of Creditors”
- Making an accounting to the Bankruptcy Court of any money received by him and/or distributed to creditors and others in the case.
B. 341 Meeting of Creditors
In both Chapter 7 cases and Chapter 13 cases, a Trustee will preside at a required meeting called the “341 Meeting of Creditors” (or sometimes referred to simply as “the 341 Meeting”). Generally, only one such meeting is held and typically lasts between 2-5 minutes. The Trustee presiding calls one case at a time and, in a one hour period, it is not unusual for a Trustee to call 20 to 30 cases. When your case is called you and your Attorney will walk over and be seated at the table where the Trustee is sitting. At that time, the Trustee will ask you questions about your case based upon the Trustee’s earlier review of your petition and schedules. Many of these questions are routine from case to case which the Trustee calls on any given day. Attorney John D’Amato provides his clients with a list of typical questions which can be expected at the 341 Meeting in order to avoid needless stress for the client anticipating this meeting.
Despite the name “341 Meeting of Creditors,” you should know that creditors rarely appear at such meetings. This is due, at least in part, to the fact that the claim (i.e. amount owed) to a particular creditor is seldom large enough to justify an appearance by the creditor’s Attorney. Even so, the Clerk of the Bankruptcy Court does mail a Notice of the 341 Meeting to creditors and other interested parties approximately 30 days after the date of the filing of the petition in case any creditor does wish to attend the meeting.
C. Chapter 7 Interim Trustee
A primary objective of a Chapter 7 Interim Trustee is to review the petition and schedules for the purpose of identifying assets which can be sold so that the sale proceeds can be distributed to your creditors. In a typical Chapter 7 case, the time spent by a Chapter 7 Interim Trustee on any given case will be quite small (approximately 2 hours or less). This is so because the property of a typical client who files for Chapter 7 relief will either be exempt or of very little value. Bankruptcy attorneys often refer to such cases as “no-asset” cases because they contain no assets which an Interim Trustee has any interest in selling. In such cases, the Interim Trustee will close the particular case within a month or two after the 341 Meeting.
On the other hand, in approximately 5% of Chapter 7 cases, assets will be available for the Interim Trustee to sell for the benefit of your creditors. These assets are typically sold at auction to the highest bidder or are sold back to you (should you wish to retain the property in question). The cash proceeds will be distributed to creditors by the Interim Trustee according to Bankruptcy Law. Generally, the Interim Trustee’s interest in a particular item of property will not be a surprise because your Attorney will generally have advised you prior to filing the Chapter 7 petition as to which assets the Trustee will seek to sell.
D. Standing Chapter 13 Trustee
In addition to performing many of the same duties which are performed by an Interim Trustee, a Chapter 13 Trustee will review your Chapter 13 plan (along with your petition and schedules) prior to your 341 Meeting of Creditors to make certain that he is satisfied that it complies with all pertinent provisions of the Bankruptcy Law. At the 341 Meeting, the Chapter 13 Trustee may wish to ask you questions about your Chapter13 plan and will attempt to iron out any issues which arise before your case is presented to the Bankruptcy Judge at the Confirmation Hearing for the Chapter 13 plan.
In a rare case, complications may arise which may require that the 341 Meeting be adjourned for approximately one month. The expectation is such that the complications will be worked out during the period of the adjournment and that the court will be in a position to confirm the case on the date case is next called by the Bankruptcy Court.
E. Chapter 13 Confirmation Hearing
Within a few hours after the 341 Meeting in a Chapter 13 case, a Confirmation Hearing will be held in which the Bankruptcy Judge will review your case to determine if he can confirm (or accept) your Chapter 13 plan. The Bankruptcy Judge will call your case, your Attorney and yourself will note their presence, and the Chapter 13 Trustee will provide a brief written report and oral report (approximately 30 seconds) to the Bankruptcy Judge about your Chapter 13 plan and generally will conclude the report by recommending that the Bankruptcy Court should confirm the plan.
The Bankruptcy Judge generally will take about five minutes or less to consider the report by the Chapter 13 Trustee, will ask you some routine questions about the case (such as the basis for the value set on your residence or whether your income is expected to rise or fall in the near future). Immediately thereafter, the Judge generally indicates a willingness to confirm the plan because it complies with the applicable provisions of the Bankruptcy Code. In rare cases, the Judge may ask that additional information, such an appraisal of a residence, be provided before he will be in a position to consider confirming the Chapter 13 plan.
F. Significance of Chapter 13 Plan Confirmation
Confirmation of a plan is significant because your creditors will be bound by the terms of your confirmed plan.
Example:
The Bankruptcy Court confirmed Kelly’s Chapter 13 plan. Among other terms contained in her plan, the plan provided that credit card debts would be paid 10% over a 5 year period (and the remaining 90% would be forgiven upon successful completion of the plan). If one of these credit card creditors is dissatisfied with the 10% repayment amount and tries to file a lawsuit against Kelly or makes harassing phone calls to her after the plan is confirmed, this credit card company can be punished by the Bankruptcy Court for failing to comply with the terms of the confirmed plan.
After your Chapter 13 plan is confirmed, the Chapter 13 Trustee will continue to collect payments form you on a monthly basis (or other periodic basis approved by the Court) for a period of 3 to 5 years as provided by your plan. The Chapter 13 Trustee will use this money to make payments to your creditors as provided in your confirmed Chapter 13. Subsequently, at the time the plan payments are completed, you will be provided with a discharge of all your dischargeable debts.
Before your plan is completed, the Chapter 13 Trustee will monitor your plan payments to make sure that you are making the required payments to him, as Trustee, and that the payments he receives will be sufficient to enable your plan to finish on a timely basis. If payments are not made as set forth in your confirmed plan, the Chapter 13 Trustee will file papers requesting that the Bankruptcy Court dismiss your Chapter 13 case. Obviously, this is a bad position to be in because a dismissal of your case would mean that the Bankruptcy Court will not provide you with a Discharge Order (which is needed to discharge your dischargeable debts).
Example:
Jack’s Chapter 13 plan was confirmed by the Bankruptcy Court one year ago. The Confirmation Order provided by the Court indicated that upon successfully completing the Chapter 13 plan, Jack would have his car debt to BIG BANK paid in full and $40,000.00 in credit card debts discharged. After one year of payments, Jack’s Chapter 13 case was dismissed for failing to make 3 of the monthly payments to the Chapter 13 Trustee which were required under the plan he proposed. All payments which Jack sent to the Chapter 13 Trustee were used to pay down the portion of the debt to BIG BANK. Because Jack’s case was dismissed by the Court and no discharge was granted to him, he will continue to owe the $40,000.00 in credit card debt and the unpaid portion of the debt owed to BIG BANK.