LAWDOG BANKRUPTCY: CHAPTER 7

2004 Examination

Duties Of Trustee In A Chapter 7 Case

When a Chapter 7 petition is filed with the Court, an interim case Trustee is appointed by the United States Trustee to assume administrative duties of the case. The Trustee attempts to locate and gather all nonexempt property, which will later be liquidated in this Chapter 7 case. Unless a different Trustee is elected by creditors, this person will normally serve until the conclusion of the case. See Section 701 of the Bankruptcy Code, reproduced here for illustration purposes only.

Bankruptcy Case Trustees must meet certain qualifications, and may be required to file a bond before beginning official duties, and may be removed for cause. Compensation is provided by a schedule under the Bankruptcy Code. See "Duties Of United States Trustee" linked here. Link does not return to this page.

With the use of "avoiding powers," the Trustee may set aside preferential transfers made to creditors within 90 days before the petition filing date. The trustee may also review and change security interests not properly perfected at the time of filing. See "Avoidable Transfers" here or from the previous menu. Link does not return to this page.

Chapter 7 Trustee Investigates Financial Affairs Of Debtor

A Bankruptcy Case Trustee is required to investigate the financial affairs of the debtor. The Trustee must also collect and reduce to money the property of the estate, be accountable for all property received, and ensure that the debtor performs as specified in the Statement of Intention. The Trustee may examine and object to claims of creditors, and oppose the discharge of the debtor. Unless the court orders otherwise, the Trustee must furnish such information concerning the estate and the estate's administration as is requested by a party in interest.

Under Section 721, the Bankruptcy Court may authorize the Trustee to operate the business of the debtor for a limited period if the operation will benefit the estate. If the business of the debtor is authorized to be operated, the Trustee must file with the court periodic reports and summaries of the operation of such business, including a statement of receipts and disbursements. See Section 704 reproduced here for illustration purposes only.

Final Reports

The Trustee is required to close such estate as expeditiously as is compatible with the best interests of the parties in interest, make a final report and file a final account of the administration of the estate with the court and with the United States Trustee. A bankruptcy trustee generally presides at 341 Meeting Of Creditors and appears at hearings involving disposition of the property of a debtor, or any matters relating to the administration of the estate. See Section 704 of the Bankruptcy Code, reproduced here for illustration purposes only. Actual cases should be discussed with your actual legal advisor or legal department.

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Section 341 Meeting Of Creditors

The Section 341 Meeting of Creditors, sometimes referred to as "First Meeting of Creditors" is intended to provide an opportunity early in the case for creditors, a Trustee, and the United States Trustee to ask questions of the debtor. The United States Trustee's Office appoints an interim Trustee for the case, but creditors may have the right to elect a different individual for the duties. See Section 702 of the Bankruptcy Code, reproduced here for illustration purposes only.

An appearance by creditors at a 341 Meeting is not required. Creditors may appear to observe, ask questions of the debtor, or to discuss matters with other creditors or the Trustee. The debtor, and both husband and wife if a joint petition is filed, are required to appear at the 341 Meeting. The Trustee is required to examine the debtor orally at the meeting of creditors to ensure that the debtor is aware of the potential consequences of a discharge in bankruptcy, including the effect on credit history, the ability to file a petition under a different chapter, the effect of receiving a discharge, and the effect of reaffirming a debt. A copy of Section 341 is reproduced here for illustration purposes only.

The United States Trustee's Office presides at this "341 Meeting". The debtor must appear and answer, under oath, questions posed by creditors, the trustee or the U.S. Trustee's office. Bankruptcy Rules Rule 2003(a) provides that in a Chapter 7 liquidation case, the United States trustee must call a meeting of creditors to be held no fewer than 20 and no more than 40 days after the order of relief. See Section 341 reproduced here and Section 343 reproduced here for illustration purposes only.

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Statement of Intention

In a Chapter 7 case, an individual debtor with secured consumer debts, such as a personal automobile loan, must file a Statement of Intention to retain or surrender the collateral. The debtor may elect to redeem the property or reaffirm debts secured by the collateral or claim the collateral as exempt. The Trustee must monitor this election. See Section 704 (3) reproduced here for illustration purposes only.

This Statement of Intention must be filed by the date of the 341 Meeting, or within 30 days after filing the petition, whichever occurs first. Within 45 days after filing the Statement of Intention, the debtor must actually implement the intent, by returning, redeeming, or reaffirming. These time periods can be extended by the court for cause. The Bankruptcy Code provides a deadline for the debtor to declare intention, and a deadline for the return of collateral in certain circumstances. When secured creditors with consumer debt know the the intentions of the debtor by the time of the 341 Meeting, it is often possible to negotiate a resolution at that meeting. See Section 521 (2) (A) reproduced here for illustration purposes only. Always discuss actual cases with your actual legal advisor or legal department.

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Rule 2004 Examination

In many instances, there are time constraints at a 341 Meeting. The 341 Meeting may be scheduled at a time when many other 341 Meetings are being held, or there may be numerous creditors present. In order to more fully examine the debtor, a creditor may have special needs which require a scheduled examination under Rule 2004. A motion must be filed with the Court to obtain an order for the debtor to appear for a Rule 2004 examination. A copy of Rule 2004 is reproduced for illustration purposes only here.

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