Most people contemplating bankruptcy are fearful of their creditors' meeting (also called the "341 meeting," after its place in the bankruptcy code, or the "meeting of creditors"). In Chapter 7 bankruptcy cases, the creditors' meeting is the only court hearing. So it's understandable that you might be anxious. This is uncharted territory, and it may feel like an adversary holds your fate in his or her hands. But I assure you, it’s not that bad. Once you understand what actually happens at the meeting, the fear will melt away. In fact, the most common reaction I get from my clients afterwards is an incredulous “That was it?”
So, just what is the meeting of the creditors and who is the trustee? First, your meeting of creditors is a bit of misnomer. The name suggests that your creditors are going to line up in court to browbeat and berate you. In fact, creditors almost NEVER show up. It’s simply not worth their time do so.
Usually, you'll be asked some questions by the trustee about your finances and bankruptcy paperwork. And the meeting won't last long. Each half hour of the court’s docket holds between 4-6 hearings. If you do the math, you'll see that your court hearing is supposed to last only 5-7 minutes.
Trustees are not judges, but lawyers. Their job is to seize and sell the assets that they are legally allowed to take (your nonexempt property) and distribute the proceeds among your creditors. Trustees are paid a sort of commission: They get a percentage of what they take. So, they are motivated to grab what they can. But they can’t grab your exempt property, which in most cases includes your house, your car, your households goods, and your clothing and jewelry.
Because trustees are also overworked, they don’t want to waste time chasing down property that isn't worth much. And most cases are “no-asset” cases, in which there is simply nothing the trustee can take. If yours is a no-asset case, the trustee will figure it out soon enough, and your hearing will be over before you know it.
In those few cases where there are some assets the trustee can seize, I acknowledge it up front and make a reasonable offer (after making sure my client is comfortable with it). This makes everyone’s life a bit easier. In exchange for keeping property that's important to you, you'll probably have to come up with a lump-sum amount or make monthly payments that are generally not to onerous. Given the amount of debt discharged, this isn't too steep a price in most cases.
While your hearing may seem scary, knowing how these meetings really work and what actually motivates the trustee should take the mystery and intimidation out of it.