If you are struggling with your finances and have chosen to seek relief by filing Chapter 7 or Chapter 13 Bankruptcy, you will be required to attend a 341 Hearing. Pursuant to 11 U.S. Code § 341, a 341 Hearing, also referred to as the 341 Meeting of Creditors, is a hearing held between you, your court-appointed trustee, and creditors. The trustee will act in place of a Judge and ask several questions related to the information provided in your paperwork to confirm that all given information is correct. Additionally, creditors will have the option to ask any relevant questions he/she may have. Often times, most creditors will choose to not attend the hearing unless they are skeptical that you may be withholding information.
WHEN DOES THE 341 HEARING OCCUR?
Upon filing for bankruptcy, the Court will appoint a trustee to your case. The purpose of a trustee is to oversee the entirety of your bankruptcy process instead of going to Court and speaking in front of a Judge. Once your trustee has reviewed all of the information provided in your bankruptcy documents, including the bankruptcy petition, the court will automatically schedule your hearing.
Both you and your creditors will receive a physical notice in the mail providing you with details regarding the 341 Hearing. This will include when the meeting will occur and where it is going to take place. During COVID-19, the “where” has shifted to being via telephone or zoom. It will also provide you with contact information for your trustee. This will be helpful for when you are preparing for the meeting and need to provide the trustee with all of your documents.
Additionally, the notice will include deadlines for when the creditors may object to your case being discharged or any of your assets that you have listed as exempt property. It is extremely important that you attend the meeting. If you fail to do so, the trustee most likely will dismiss your case, automatically disqualifying you from receiving a discharge.
Our office has extensive experience at this hearing and work our best to provide you with ample knowledge and information prior to the hearing date.
BEFORE THE HEARING
When preparing for the meeting, there are a few things that are key to ensuring a successful meeting. One of the most crucial matters is that you look over your petition and all included paperwork once more. If you detect a problem or error, it will be best to mention this during the 341 Meeting. For certain errors, such as a name misspelling, you may need to file for an additional hearing to make an amendment prior to the 341 Hearing.
Once the time has come to attend the 341 Meeting, you must bring an official photo ID, proof of SSN, as well as any new documents that you have received after completing your bankruptcy filing. Although your paperwork has already been filed with the court and the trustee will be given a copy, it may be beneficial for you to bring your own copy.
WHAT HAPPENS DURING THE 341 HEARING?
When attending the 341 Hearing, it is likely that you will be waiting amongst a group of other filers. Generally, trustees schedule approximately 10 341 Hearings per hour. During the assigned time slot, you will observe any other hearings that take place before you are called. Each meeting is not very long and takes around 10 minutes. Once called, your trustee will confirm your identification and begin to ask you any questions he/she deems necessary. Prior to the 341 Meeting, your bankruptcy attorney should help prepare you for any questions the trustee may ask. Our office will ensure that you are properly prepared for this hearing!
The trustee’s questions are generally similar for most hearings, focusing on your exempt assets and other information from listed in your paperwork. If you are not the first 341 Hearing scheduled during your time slot, you may benefit from hearing these questions asked to the other debtors scheduled before you. It is important to remember that you are under oath and must provide the trustee with truthful answers. Failure to do so can result in severe consequences, including the risk of losing your chance of a discharge.
Often times, the trustee may ask questions regarding the value of any property you own. For example, in a Chapter 7 filing, this allows the trustee to determine how much the creditors are owed depending on the amount of nonexempt property that will be liquidated. In a Chapter 13 filing, this determined amount will be paid through the Chapter 13 Plan. If the trustee feels you have listed the value of a particular asset incorrectly, he/she may ask about this in order to ensure the proper values are established.
Another common question is in regard to your total income. While you are required to list out all of your disposable income in your paperwork upon filing for bankruptcy, the trustee will look over the information provided. By doing so, he/she will double-check for errors and ask you to elaborate on any discrepancies. This helps to determine whether or not your case will be treated as a Chapter 7 or Chapter 13.
After the trustee has finished asking his/her questions, creditors will be given the opportunity to question you. Generally, creditors only choose to attend the hearing if he/she feels you have withheld important information and wishes to find out more regarding your finances. If all necessary questions have been asked and the information provided has been confirmed, the trustee will conclude the meeting. If he/she does so, you will no longer be required to attend any hearings and may have your case discharged after completing the terms established in your filings. For example, if you are filing a Chapter 7 and your assets are to be liquidated, assets will be sold, and the money received will be used to pay creditors. If the trustee does not conclude the meeting, this may be because he/she needs more information before doing so. In this case, a new hearing will be scheduled. If found guilty of purposely intending to hide assets, you may be required to pay large fines, serve a prison sentence, or a combination the two.
One of the main goals of the 341 Hearing is to make sure that the debtor is not involved in some form of bankruptcy fraud. Bankruptcy fraud could occur in several ways, such as hiding some of your assets by transferring ownership from yourself to another party or lying to take advantage of the system. If you are found guilty of completing bankruptcy fraud, your trustee must determine what will happen next. If you have transferred assets to someone else you must include this information on Form 107, the statement of financial affairs. In some cases, the trustee may be able to cancel the transfer if the transfer has been made within two years of the initial filing. Also known as a “clawback", doing so allows the trustee to redistribute the assets amongst the creditors. In more serious manners, the trustee may not approve for your discharge or even ask the court to begin a criminal investigation. If you will no longer receive a discharge, you are required to continue paying back your creditors until all debts have been paid off.
Another instance in which the clawback may be used is if the debtor has paid back a creditor immediately before his/her bankruptcy filing. These are considered to be preferential transfers. If the transfer was made within 90 days of the initial filing date and was valued at a minimum of $600, this would qualify as a preferential transfer if the creditor received more money than he/she would have through the bankruptcy process. If these creditors are those whom you have a personal relationship with, like friends and family, the transfer qualifies as preferential if it occurred within a year of filing. Again, these transfers must be reported in the Form 107 Statement of Financial Affairs to prevent further complications from arising.
While withholding information in your paperwork creates an issue, making large nonessential purchases, like going on a vacation or buying a new sports car, prior to filing or receiving credit in illegal ways may also provide reason to believe you may be attempting to take advantage of the bankruptcy system. Pursuant to 11 U.S.C. § 523(a)(2)(C)(i), nonessential purchases totaling over $750 within 70 days of the initial filing date or debts over $500 obtained for the purchase of nonessential items within 90 days of filing are considered to be nondischargeable. In other words, the Court will not allow you to seek bankruptcy relief to rid you of these debts. Additionally, if the Court finds that you did not provide creditors with valid information when filing for a loan or credit card, it is likely that you will not be able to receive a discharge for these debts.
One way to ensure that you will not be accused of bankruptcy fraud is to be aware of which assets may be exempt and which may not be. Along with federal exemption laws, each state has its own exemption laws. When filing, you may be able to pick which exemption laws you wish to follow. However, California requires that the state exemptions be used. While exempt assets are protected from being sold by the trustee, nonexempt property is sold, and the money is distributed amongst creditors. In some cases, you may be able to still keep some nonexempt assets. Other times, the trustee may make a deal with you that involves exchanging one asset for another of similar value. Additionally, you may be able to buy back your assets, or it may be abandoned all together. Trustees may abandon property for several reasons. This includes property whose loan value is greater than the property’s market value. Once the asset is sold, the trustee will not have anything left over to pay off creditors, so it would be easier for the trustee to simply abandon the asset. If assets do not yield enough value after being sold, creditors will not be paid which defeats the purpose of the liquidation process.
AFTER THE 341 MEETING OCCURS
If the trustee has found that all information provided is correct and no longer has any further questions for you, the hearing will be concluded. This will continue your bankruptcy process as planned. In the case of a Chapter 7 filing, your assets will be liquidated, and the money earned will be used to pay your creditors. If filing a Chapter 13, you will make payments as scheduled in your bankruptcy plan. Once all payments have been made, you will receive a discharge and your case will be closed out. If any problems arise throughout the process, it is crucial that you contact your bankruptcy attorney to address the issue and see if any additional steps must be taken.
HOW CAN WE HELP?
If you are behind on debts owed to creditors, contact Modesto Bankruptcy Attorneys today to schedule free consultation. By speaking with us, we will analyze your situation to determine what your best option is. With our extensive knowledge of the Bankruptcy Code, we will be able to apply it to your best scenario. This will allow us to help you prepare for your bankruptcy case, including the 341 Hearing.
We help clients in the following areas: Modesto, Stockton, Turlock, Ceres, Empire, Escalon, Hughson, Lathrop, Linden, Manteca, Oakdale, Patterson, Ripon, Riverbank, Salida, Tracy, Waterford.