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16 November 2009

What happens after I file? Do I have to go to court?

Post-petition procedure will vary slightly based on your jurisdiction and which chapter you file under. In Chapter 7, a "section 341 meeting of creditors" is scheduled approximately 4-6 weeks out after your case is filed with the court. With electronic filing, most attorneys would be able to tell you the date, time, and location of your hearing within minutes after your case is filed. Otherwise, you will get a notice of your hearing from the court in the mail a few days later. The location of your hearing is based on where you reside, and the date and time depend on how heavy the bankruptcy filing volume is. Your attorney largely has no control over the assignment and courts generally have a low tolerance for absence. You requested bankruptcy relief, and it is your responsibility to appear at the hearing.

We call this a meeting of creditors, but in reality, creditor appearances are rare, especially in Chapter 7. You and the hundreds of other people who file each day each have dozens of creditors, making a personal appearance very impractical. Also, there's usually nothing for a creditor to gain by making an appearance. Ordinarily, the hearing will consist of you, the Trustee, and your attorney.

When can you expect a creditor to appear? Often, we get what I refer to as the "unsophisticated creditor" who knows nothing about bankruptcy, has not spoken to an attorney, and really has no idea why they are at the hearing. These types of creditors often come in the form of landlords, ex-spouses, and perhaps an individual who has obtained a civil judgment against you. These are my favorite types of creditors, because they are almost always entertaining to watch. Again, they have no appreciation for how bankruptcy works and have not consulted an attorney, and they come in with delusions of grandeur - thinking that their civil judgment or contract entitles them to special treatment over other creditors. More often than not, they leave disappointed. Some of them do so more theatrically than others, and that's where the free entertainment comes from.

Sometimes, you might get a secured creditor who appears at the hearing to facilitate the signing of a reaffirmation agreement. Other times, you might get a creditor who wants to question you so that they can make a challenge on fraud. This is especially likely if they have reason to believe that you have not made a full disclosure, have transferred substantial property prior to filing, or incurred debt just prior to filing. It's rare, but it does happen. This is why it is so important for you to be entirely honest with your attorney so that he can anticipate these problems and work to alleviate the problem as best he can before your case is filed. Once your case is filed, your attorney has much less control over the outcome.

The trustee has two primary functions in Chapter 7. The first is to examine you under oath to ensure that your petition and schedules are accurate. They may engage you in a line of questioning designed to flush out information that might have been ommitted. Their second function is to examine your assets to determine whether there is any un-exempt equity in your property that could potentially be liquidated for the benefit of your unsecured creditors. These meetings are fairly routine and buearucratic; often extremely boring. The average hearing lasts anywhere from 5-10 minutes. Sometimes, the trustee may adjourn your hearing to another date. Whether you have to appear (and whether your attorney needs to appear) depends on why your case is being adjourned. If the trustee is simply requesting some additional documentation, and if that documentation is provided, appearances are ordinarily not necessary. If futher investigation or testimony is necessary, you would need to appear.

341 hearings may be held in a courtroom, but might also be held in a small conference room. The odds of you ever meeting the judge assigned to your case are slim, unless you need to attend a hearing to discuss a reaffirmation agreement you signed, or if other problems arise with your case.

After your 341 hearing, there is a 60 day period for creditors to file objections to your discharge (which, in my experience, are rare). Once that deadline has passed, assuming there are no objections, the court issues your discharge. Sometime after your case is filed and before your discharge is issued, you must complete a financial management course and make sure the certificate is filed with the court.

Chapter 13 is slightly different. The average length of the hearing is slightly longer, and the odds of creditor appearances are slightly higher. In Chapter 7, you had secured creditors appearing to discuss reaffirmation. They are more likely to make an appearance in Chapter 13 to verify that their collateral is insured and perhaps to discuss valuation for cramdown purposes.

The Chapter 13 Trustee focuses less on your property and the valuation, and more on the repayment plan that you proposed and to verify that Means Test calculations were done properly. His job is to ensure that both were done properly and with accordance to federal statutes and local rules. That having been said, Chapter 13s are far less rigid than Chapter 7s and many aspects of your case are more open to interpretation and challenge. It is not uncommon for additional amendments or negotiations to be necessary prior to confirmation. Therfore, adjournments are also far more common.

In Chapter 13, you will not receive a discharge until the end of the term of your repayment plan (assuming you are eligible for a discharge).

Some jurisdictions require a confirmation hearing, to be held in front of the judge. I am fortuante enough to practice in a district where those hearings are the exception, and not the rule. So, I can't really tell you much about them, other than for this reason, and in the event you default during your repayment plan, you are more likely to appear in front of a judge in Chapter 13 than in Chapter 7.