A Chapter 7 Bankruptcy Creditors Meeting is often the only direct interaction that you may have with the bankruptcy court. While there are many similarities in bankruptcy creditors meetings in the different types of bankruptcy cases, there are also some specific issues that are reviewed in a Chapter 7 Bankruptcy Creditors Meeting.
Focus of Chapter 7 Creditors Meeting
The Creditors Meeting in a Chapter 7 Bankruptcy case is conducted by the appointed Chapter 7 Trustee. The Chapter 7 Trustee’s mainly focuses on your assets as a Chapter 7 bankruptcy is called a “liquidation” of assets. This does not mean you will lose anything in a Chapter 7 case as the Bankruptcy Code allows you to protect assets with both exemptions under Section 522 and exceptions under Section 541.
The Trustee is most concerned that you accurately and completely listed all of your assets. In preparing a bankruptcy petition, it is important to review with your attorney everything you own or may have an interest in.
Chapter 7 Trustees are experienced in asking questions about assets and their values. The bankruptcy petition should have a complete list of all of your assets and your estimate of their value. For our clients, this does not cause alarm as we have worked with them to ensure that they have carefully listed all of their assets in the petition.
Remember that the purpose of a Chapter 7 Bankruptcy is to offer a “fresh start” to the “honest and unfortunate debtor”. Chapter 7 Trustees typically have many years of experience and empathize with those who fell on bad times and need the fresh start offered by the Bankruptcy Code.
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If you own any real estate, the Chapter 7 Trustee will ask you questions about the property, the mortgages which may be on the property, and your ownership in the property. The bankruptcy petition would include the property information and your estimate of its value. We also typically provide the Chapter 7 Trustee with a recent market analysis or appraisal of the property.
The Chapter 7 Trustee will ask when you purchased the property and how much you paid at that time. As we often obtain a copy of the deed to the property in our bankruptcy preparation process, we often can assist if our clients need to refresh their memory.
The Trustee may ask if you agree with the value of the property in the market analysis or appraisal. Trustees often work with realtors who also provide them with the information or refer to public information or estimates of value in services like Zillow or Trulia.
The Trustee will also ask if you previously owned any real estate and what happened to it? Depending on the timing of the sale or transfer, you may be asked about the sale or transfer and what happened to any proceeds of the sale.
The Chapter 7 Trustee will then ask about your personal property. The most simple definition of “personal property” is anything you own which is not real estate.
The trustee’s questions about personal property will be very similar to the questions that you answered for your bankruptcy attorney in preparing your bankruptcy petition. While it is recommended you review your bankruptcy petition before the creditors meeting, the trustee’s questions are not intended as a test.
The Trustee is mostly interested in personal property which may be particularly valuable. This may include newer vehicles without a loan, a life insurance policy with “cash surrender value”. Some Chapter 7 Trustee’s ask your current bank balances.
You are also typically asked about whether you have any current or expected personal injury cases or whether you are expecting an inheritance or other recovery from someone who has passed away.
The Chapter 7 trustee will also ask questions about anything you may have transferred in period prior to the filing of the bankruptcy petition. The trustee may ask about transfers anwhere from one year to up to six (6) years prior to the bankruptcy filing.
The purpose of these questions is to determine if there are any transfers that the trustee may wish to seek to “claw back” into the bankruptcy estate. This may include a large sum of money paid to a creditor shortly prior to filing your bankruptcy petition – known as a “preferential transfer”. The Trustee could use the “strong arm” powers that he has under the Bankruptcy Code to make that creditor return those monies so that the Trustee can split the funds up evenly amongst your creditors.
Issues relating to transfers of property should be carefully reviewed with an experienced bankruptcy attorney before filing any bankruptcy case.
Cause of Your Financial Difficulty
Finally, the Trustee will ask you what caused your financial difficulties that lead you to file a bankruptcy case. This is not meant to judge you as a person or how you managed your finances before filing bankruptcy.
Typically, the Trustee is an experienced person who understands what lead you to file for bankruptcy protection and a short answer is all that is needed. Any Chapter 7 Bankruptcy Trustee understand how divorce, loss of a job or income, illness or disability, unforeseen large expenses, or simple overextension of your credit, could lead to seeking a Fresh Start Chapter 7 Bankruptcy.
Consult an Experienced New Jersey Bankruptcy Lawyer
The information provided here, as with all information on our website, is not intended to provide legal advice to anyone considering bankruptcy. If you are experiencing serious debt problems or discussing these problems with a friend or family member, the easiest way to learn how the bankruptcy laws may protect you is to arrange a Free Case Review with an experienced New Jersey Bankruptcy Lawyer. Learn about your rights and options before you make a decision from attorneys who have helped families and businesses for over 30 years. We know that making that first call is often the hardest step but once made, you can often find relief and a fresh start for your financial future.