Trustee Blog

Bankruptcy Creditors at the 341(a)

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Last week at Riverside Chapter 7 Trustee Steve Speier’s meeting of creditors, there appeared a creditor for a case. The creditor had been to the hearing a few weeks before. At the previous hearing the debtor did not show up and the matter was continued one time. The creditor came back, but the debtor did not show up again.

Trustee Speier said that since the debtor did not appear twice, that he would ask the court to dismiss the case. The Creditor hung around for about half an hour and then left. Shortly after the creditor left, the debtor appeared and asked to have her case heard.

This request put the trustee in a bind. The debtor did appear on the day that she was told to, but was late for the hearing. The creditor appeared for the hearing, but now had gone away. The trustee could have let the matter stand as a non-appearance and then let the court decide if it would be dismissed, or the trustee could have taken the debtor’s testimony then. Mr. Speier did another option. He continued the matter for the debtor and then he called the creditor’s office and told him what had happened. This way the Debtor would have to come back again and the creditor would have his opportunity to question the debtor. Here are three things we can learn about being a creditor in a bankruptcy case:

1.Notify the Trustee that you are a creditor and you want to ask the debtor questions.

Had the creditor not told the Trustee that he was a creditor on the case, the matter would have been heard and the creditor would have lost this opportunity. The creditor would have had to get the information another way. (One way being asking the Bankruptcy Judge to order a “2004” Debtor’s Examination. The name comes from the Bankruptcy Rule 2004.)

By telling the Trustee he was a creditor and by leaving his contact information, the creditor preserved his rights.

2. Be prepared to ask questions that the trustee would want to know about.

The Chapter 7 trustee is interested in the case for assets and for fraud. As a creditor, if you have information that the debtor is lying or has undisclosed assets, then the questions you ask will help the trustee administer the bankruptcy case. The more information you can provide will allow the trustee to gain assets from the debtor. The more money that comes into a case, the greater likelihood that your bankruptcy claim may be paid.

3. Fraud is grounds for the bankruptcy case being dismissed.

If you do not know of any assets the debtor amy be hiding, another tool you can present is if the debtor engaged in fraud before the filing of the case. Did the debtor have a boat or a car that he gave away prior to the filing of the case? Did the run up bills before the filing and then left the creditors holding the bag?

These are things that may get the case dismissed. If you have this information, contact the Trustee assigned to the case. And send a letter to the US Trustee assigned to the case. The US Trustee’s job is to see that the debtors do not commit fraud in obtaining a discharge. If the debtor does not receive a discharge, then you debt will survive and you can proceed against him or her to collect on the debt.

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