All bankruptcy filings require that the Debtor and, if applicable, the Debtor’s spouse, attend a hearing about thirty days after the case is filed. In the bankruptcy world, this is commonly referred to as the “341 hearing” because such a hearing is required by federal law as is found at 11 U.S.C. § 341 (a).
Sometimes this hearing is also referred to as the “creditors hearing” although it is not common for creditors to attend the hearing. A 341 hearing is required irrespective of the type of bankruptcy filed, be it a Chapter 7, Chapter 13, Chapter 12, etc. Ordinarily in Nebraska and the Southern District of Iowa, this is commonly the ONLY hearing that is required for the Debtor to attend.
As of the publication of this blog, all Chapter 7 and Chapter 13 section 341 hearings are conducted telephonically. Prior to Covid 19, Debtors almost always had to physically appear at a court appointed physical location, such as a federal courthouse, and give live testimony under oath. There has been discussion that future 341 hearings will be conducted via Zoom, but that hasn’t been rolled out in the Nebraska and Iowa jurisdictions where this firm practices bankruptcy law.
The telephonic hearings involve calling a conference telephone line about 10 minutes before the hearing and quietly waiting (mute you microphone) for your case to be called, which I’ll discuss in more detail below. Needless to say, a huge amount of anxiety and time have been reduced for people filing bankruptcy in our jurisdictions because physical appearances are not currently required.
Who Conducts the 341 Hearing?
For our purposes, I will discuss Chapter 7 and Chapter 13 cases only. The vast majority of individuals filing for bankruptcy file either a Chapter 7 or Chapter 13 and, in these cases, there is always and automatically a Trustee appointed by the Bankruptcy Court.
In Chapter 7 cases, one of several Trustees may be appointed and each Trustee has slightly different styles of conducting the 341 hearing.
If a Chapter 13 case is filed, a dedicated Chapter 13 Trustee is appointed, with Nebraska and Iowa currently having only one Chapter 13 Trustee for each state. Iowa is broken into a Northern District and a Southern District, and they have previously had separate Chapter 13 Trustees but at the moment, there is only one. Again, each Trustee has their own style of conducting the 341 hearing so knowing what exact questions will be asked is not entirely predictable.
What is a Trustee and What is Their Function?
Many people think that they will need to appear in front of a Judge and answer questions. However, in the District of Nebraska and in the Southern District of Iowa (which includes Council Bluffs, Des Moines and most other cities that are located South of the I-80), the Debtor rarely ever sees or interacts with a judge.
By comparison, all Debtors must answer the questions of their Trustee. A Trustee is not a judge and does not work for the Bankruptcy Court. Most trustees are attorneys (but they don’t have to be) and apply to become a Trustee. They are appointed by the United States Trustee Program, which is part of the Department of Justice.
A Trustee has several duties, but their primary responsibilities include insuring that the bankruptcy documents are complete and accurate and ensure that creditors are treated fairly per the bankruptcy laws.
For creditors to be treated fairly, they must substantially receive what funds they may collectively be entitled to during the bankruptcy, if there are any “non-exempt” assets.
Chapter 7 Trustees must determine whether or not the debtor has assets that are not protected by exemptions under state and federal law. In short, many assets, commonly all in many cases, are exempt from the creditors and Trustee, but that is not always the case. Frequently, low value or contingent assets that are not exempt are not claimed by the Trustee because they are of little or nuisance value.
However, each Trustee must perform his or her duties as a competent businessperson and has a fiduciary duty to protect the interests of unsecured creditors. Therefore, one of the main purposes of a 341 hearing is for the Trustee to ask direct and relevant questions pertaining to whether or not ALL of the Debtor’s assets are listed and listed in such a way that the Trustee can make an informed decision on the value of the assets.
For example, if a Debtor owns a house and simply states that the value is $125,000 but provides no other details, the Trustee needs additional information to determine whether the house really is worth $125,000 and thus, with a Debtor can expect several questions on how they came up with the stated amount at the hearing. The Debtor and his or her attorney can really help the Trustee (and themselves) in his or her duties by providing critical information, such as explaining how the value was determined. Providing as much relevant information as is possible in listing your assets makes the 341 hearing go much quicker and smoothly.
How to Have a Successful 341 Hearing
Knowing what the Trustee (or creditor) is looking for at a 341 hearing is key. Trying to memorize answers and anticipate questions that the Trustee is fine, but remember the spirit and purpose of the hearing, i.e., to determine if the bankruptcy documents are complete and accurate. If they are, then the Trustee’s job is made much easier and your case will go smoothly.
On the other hand, if your bankruptcy documents (commonly called the Petition or Schedules) are incomplete, inaccurate, misleading, or simply carelessly prepared, then a debtor is in for a rough hearing and may face other difficulties thereafter. Therefore, well considered, accurate, clear, and complete documents filed with the Court from the start is extremely important, cannot be overemphasized and is the very best thing you can do to have a successful 341 hearing and overall bankruptcy success.
Tell your attorney everything before the case is filed even if you are fearful of losing something or getting in trouble. A competent bankruptcy attorney has special knowledge of what is important in your case and will properly and legally guide you and help you disclose relevant information.
Don’t hold back on even the smallest of detail or judge for yourself whether something is relevant or not. When in doubt, explain everything to your attorney before your case is filed so that he or she can properly prepare your bankruptcy Petition and Schedules. You should expect and welcome your attorney’s validation and friendly scrutiny of the information you are providing- this protects you.
What are Typical Questions Asked at a 341 Hearing?
The following gives a future Debtor a sense of the type of questions or statements that will be made:
- State your name for the record. Is the address on the petition your current address?
- Did you provide your attorney with a current photo identification and proof of your social security number? (The Trustee then will ask the attorney if they have confirmed this information).
- Did you sign the petition, schedules, statements, and related documents and is the signature your own? Did you read the petition, schedules, statements, and related documents before you signed them?
- Are you personally familiar with the information contained in the petition, schedules, statements and related documents? To the best of your knowledge, is the information contained in the petition, schedules, statements, and related documents true and correct? Are there any errors or omissions to bring to my attention at this time?
- Are all of your assets identified on the schedules? Have you listed all of your creditors on the schedules?
- Have you previously filed bankruptcy? (If so, the trustee must obtain the case number and the discharge information to determine the debtor(s) discharge eligibility.) Note, however, that this information should already be on your documents.
- What is the address of your current employer?
- Is the copy of the tax return you provided a true copy of the most recent tax return you filed?
- Do you have a domestic support obligation? To whom? Please provide to me the claimant’s address and telephone number, but do not state it on the record. Note: This information should already be on your documents. Note: Child support and alimony, daycare expenses, etc. are domestic support obligations.
- Have you read the Bankruptcy Information Sheet provided by the United States Trustee? Note: All clients of this office receive that information sheet on day one. It is relatively basic and for the most part just describes the different types of bankruptcies.
- Do you own or have any interest whatsoever in any real estate?
- Do you own an automobile?
The Trustee can add any number of questions if he or she feels the need to do so. Some hearings are shorter than others, for example, simple consumer cases typically have less questions than business related cases.
341 Hearings Shouldn’t be Scary
Do not be afraid of a 341 hearing. It is simply a way for the Trustee to make sure that your bankruptcy documents are complete and accurate and sense your honesty and to perhaps get a few more details on questions that he or she may have after reviewing your Petition and Schedules.
Creditors, too, can ask questions that are relevant to your finances and bankruptcy documents. Just calmly answer the questions and nothing more. Your attorney or an attorney requested to represent you by your attorney) will be on the phone with you to help you along, if necessary. You are NOT alone. Just tell the truth and don’t guess the answers if you are unsure. If you are unsure of a question, just ask the Trustee to either repeat the question or state it in another way.
Ask for Professional Help
Our experienced bankruptcy lawyers can help you sort out your options and through the details to help you properly file your Petitions and Schedules and throughout the entire bankruptcy process. We service clients throughout Nebraska and Iowa and we are here to help. Please call 402-933-8600 Request a free initial consultation to speak with our lawyers. If you cannot come to our Omaha offices, we can consult with you by telephone.