Articles / 07.13.2015

My Bankruptcy Has Been Filed, What Is Next?

Authored by: Kevin C. Susman

The following is general information to help you better understand the trustee’s role in the chapter 7 bankruptcy process. It is not intended to be legal advice, so if you have questions that require legal advice, please contact your bankruptcy attorney.

What is a Bankruptcy Trustee?

Once you have hired a bankruptcy attorney, he/she will prepare your bankruptcy petition. The bankruptcy petition lists all of your assets and debts and provides information about your income, expenses and past financial transactions. No information that is requested should be left out. The petition is then filed with the court. The Bankruptcy Court immediately assigns a case number and a bankruptcy trustee (the “Trustee”). The Trustee works for your creditors. The Trustee is responsible for reviewing the representations you have made in your bankruptcy petition and collecting any assets that may be available for your creditors. The Trustee then pays your creditors with the proceeds of the assets collected.

What is a 341 Creditors’ Meeting?

After your bankruptcy has been filed, the court will set a date and time for a “meeting of creditors” required under Section 341 of the Bankruptcy Code (the “341 Meeting”). The Trustee is the administrative officer at the 341 Meeting. Your creditors are given notice of the meeting, and may attend if they choose to do so. Often, there are no creditors who choose to attend the 341 Meeting, which typically lasts 10-15 minutes.

The Trustee may require that you bring some or all of the following documentation to the 341 Meeting:

  • Paystubs and/or proof of income for the month prior to, the month during and the month following the filing of the bankruptcy;
  • Homeowner’s insurance policy; including any riders, or renters;
  • HUD-1 settlement statement(s) for any real estate refinanced or sold within the two (2) year period prior to filing;
  • Life insurance policies;
  • Plan summaries for any retirement plans;
  • Titles to vehicles, boats, motorcycles, etc.;
  • Vehicle purchase agreements and disclosure statements for any vehicle acquired within the last year;
  • Bank statements covering the most recent ninety (90) days, through and including the date of filing;
  • Copy of a divorce decree and separation agreement, if debtor has been divorced within the last two years; and
  • The name and current address of every individual to whom the debtor makes support payments.

It is very important that you come to the 341 Meeting prepared with all documents requested. If you are asked for any additional documents, make sure you provide them promptly. If you fail to bring all the required documents, the Trustee may demand the information and reschedule the hearing for another date. Be honest with your answer to any questions; do not try to hide any information or assets. Remember to stay available and in contact with your attorney.

The Trustee’s task is to review the petition and all documents to see if there are any assets that can be taken and sold for the benefit of the unsecured creditors. If there are assets that can be recovered, the Trustee will designate your case an “asset” case. If there are no assets to be recovered, the Trustee will designate your case a “no-asset” case.

My Case is an Asset case, Now What?

If the Trustee believes there are assets that can be taken and sold for the benefit of the unsecured creditors, he may ask for additional documents. If the Trustee is investigating cash in bank accounts or other money related issues, the Trustee may ask for additional bank statements. If the asset is a vehicle, the Trustee may ask for a copy of the vehicle’s title and any lien information. If the asset is a business, the Trustee may ask for business bank statements, tax returns, and a list of assets. The Trustee could also ask for official appraisals of the asset or other related documents. If the Trustee does not receive the documents needed, the Trustee may request a 2004 Examination.

What is a 2004 Examination?

Rule 2004 of the Federal Rules of Bankruptcy Procedure allows “any interested person” to require you (or someone else with knowledge about your case, if necessary) to testify and produce documents on matters related to your bankruptcy (the “2004 Exam”). The 2004 Exam is typically requested by the Trustee to get further information regarding possible assets or questions regarding your petition. The 2004 Exam involves a more detailed investigation of issues related to your bankruptcy. It is similar to a deposition, and usually requires the production of documents. The Trustee will use the 2004 Exam to investigate:

  • The location of your assets
  • Your financial transactions
  • The accuracy of your bankruptcy schedules and other papers, and
  • Whether there is any reason to believe a fraud has been committed.

What Happens if the Trustee Finds Assets?

When the Trustee reviews the petition, or examines the debtor at the 341 Meeting or in a 2004 Exam, the Trustee may find assets that are worth more than the exemptions the debtor is allowed under the law (“Non-exempt Assets”). For example, a debtor has a vehicle which is worth $8,000. The debtor takes the exemption for vehicles of $3,675 and has no other exemptions to use. This leaves a balance of $4,325 owed to the estate.

If this occurs, you have a few options:

  • Pay the value of the non-exempt portion of the asset to the Trustee ($4,325);
  • Turn the asset over to the Trustee to be sold at auction;
  • Attempt to settle or compromise the claim on the asset for a lesser amount (if there are grounds to do so and subject to Bankruptcy Court approval);
  • Prove the value of the asset is not worth more than your exemption

If you turn the vehicle over to the Trustee, and it is sold, you are still entitled to the exemption amount. In the above example; if the vehicle is sold at auction for $7,000, you will still receive the exemption amount of $3,675. However, if the vehicle is sold for less than the exemption amount, you will only receive the proceeds of the sale.

Conclusion

If you are honest, forthright and provide all the information and documents requested, the Chapter 7 bankruptcy process should go smoothly and quickly. If you have any questions regarding the bankruptcy process or any requests from the Trustee, contact your bankruptcy attorney at once.