This is the second of a series of articles the author is writing concerning substantive and procedural issues pertaining to individual debtor(s) filing for relief under Chapters 7 and 13 of the U.S. Bankruptcy Code. The first article mainly focused on substantive issues pertaining to the Chapter 7 process. The within article provides details of the procedural process, i.e. what debtor(s) can expect to happen after filing a Chapter 7 petition.

The Chapter 7 petition should include all assets owned by and all liabilities owed by the debtor(s); i.e. a list of all of the debtor(s) secured and unsecured debts. The assets include any monies the debtor(s) expect to receive in the near future and the liabilities include all/any of the debtor(s) ongoing contractual obligations. The debtor(s) have a right to rescind all ongoing executory contracts, i.e. ongoing contractual obligations the debtor(s) had at the time the petition was filed. If the debtor(s) assets are all exempt as is the case in the vast majority of Chapter 7 cases, (the Bankruptcy Code exemptions are the topic of a separate article accessible from the home page of our website), all unsecured debts not procured through any fraudulent and/or willful misconduct by the debtor, will be discharged at the end of the case.

Approximately four weeks after the petition is filed the Bankruptcy Court schedules a 341(a) Hearing; the 341(a) Hearing is also commonly referred to as the meeting of creditors. All debtor(s), including both a husband and spouse in the case of a joint petition, must appear and answer questions under oath at the 341(a) hearing. If the debtor(s) cannot speak and understand English, it is the debtor(s) obligation to bring with them a competent interpreter. The interpreter does not have to be licensed and could be a family and/or friend. Although each one of the debtor(s)' creditors have a right to show up and ask the debtor(s) questions concerning their assets and liabilities at the 341(a) hearing, it is rare for any creditor to appear at the 341(a) hearing. In the vast majority of cases, the Chapter 7 Trustee (who is appointed by the Bankruptcy Court at the time the Chapter 7 petition is filed) will ask the debtor(s) a series of questions pertaining to the debtor(s) assets and liabilities. Since debtor(s) assets usually fall well within the exemptions allowed by the U.S. Bankruptcy Code, the questions asked by the Trustee are mostly perfunctory; e.g. the Trustee will likely ask if the debtor(s) expect to receive a significant amount of money in the near future; if they are suing anybody or expect to file a lawsuit against anybody in the near future, what caused the debtor(s) to have to file for Chapter 7 relief, etc….

Another commonly asked question is whether the debtor(s) used any of the credit cards listed in their petition during the several months preceding the filing of their petition. The reason for this question is that if a debtor(s) runs up a credit card and/or any other debt when the debtor knew or reasonably should have known that he/she was insolvent, the Trustee and/or a creditor can argue that the debt which was run up during this time period constituted fraudulent conduct on the part of the debtor(s). If a creditor files a timely objection and the Bankruptcy Court finds that a debt was procured through the debtor(s)' willful, fraudulent conduct, the debt will not be discharged by the Bankruptcy Court's final decree and/or discharge order.

In the Bankruptcy Court's Notice scheduling the 341(a) hearing, a deadline is set by when creditors have to file all/any objections to their debt being discharged. As indicated above, since most Chapter 7 cases filed by competent attorneys on behalf of debtors are legitimate, it is rare for a creditor to file any objections and even more rare for a Bankruptcy Court to make such a finding. It is worth nothing, however, that the Code provides for a presumption that the debtor knew that he/she was insolvent if the debt was procured during the 90-day period preceding the filing of the Chapter 7 petition. If any such debt was incurred during this 90-day period, the debtor would still has the right to rebut this presumption, i.e. prove that the debtor did not know that he/she was hopelessly insolvent when the debt (that is the subject of the objection) was incurred.

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