Bankruptcy law contains intimidating terminology like meeting of creditors, federal court, judge, and trustee. These terms can frighten and confuse the average debtor. Many fear that the bankruptcy process is a trial like setting with testimony from the debtor on the witness stand. Others imagine probing questions from a federal judge. Most have no idea what to expect.
Bankruptcy is a federal legal process. When you file a voluntary bankruptcy petition you are asking for legal protection from creditors. The moment you file a bankruptcy case a judge is assigned and an injunction is issued against your creditors forbidding collection action against you. You do not have to ask for this injunction, it is issued automatically (called the “automatic stay”). The intent of the automatic stay is to give you some breathing room and a chance to reorganize your finances without pressure from creditors.
While a federal bankruptcy judge is assigned, you will never see the judge unless there is a contested issue in your case. A bankruptcy trustee is appointed to review your petition and schedules, and ensure there is no fraud in the case. The United States Trustee Program is a component of the Department of Justice and is responsible for overseeing the administration of bankruptcy cases. In Chapter 7 cases your trustee is a “panel trustee,” usually an attorney or CPA appointed by the Chapter 7 US Trustee. The Chapter 13 “standing trustee” oversees Chapter 13 cases directly.
Section 341 of the Bankruptcy Code requires that you attend a meeting with the bankruptcy trustee. Your creditors and other interested parties are invited to this meeting, which is called by many names including “the trustee’s meeting,” “the 341 meeting,” and “the meeting of creditors.” Your meeting is often one of dozens that the trustee interviews that same day. In nearly every case no creditors appear and the meeting lasts just a few minutes. The trustee will ask you for identification, ask you to verify that the information that you have provided is accurate and has not changed, and may ask questions that are specific to your case. Any creditor who appears may also ask brief questions. Your attorney will accompany you to this meeting and ensure that your rights are protected. Typically this is the only time you will see the bankruptcy trustee. Most debtors leave the trustee’s meeting amazed at how simple and quick the process is.
If there is an issue with your case that requires a hearing or special action by the bankruptcy judge, your attorney will explain the process to you. In rare cases there may be a hearing in open court that requires your attendance, or there may even be a trial before the judge. These issues are usually identified by your attorney even before your case is filed.
The federal bankruptcy process is designed to be quick and efficient. Around a million and a half cases are processed through the bankruptcy courts each year, so a very small percentage of debtors every actually see the inside of a courtroom. Your attorney can explain the specifics of this process and how it will apply to your specific case.