02 Feb The Bankruptcy Creditor’s Meeting: The Trustee’s Statement Of Intentions!
In bankruptcy, probably the thing that makes debtor’s the most nervous is the Meeting of Creditors (sometimes this meeting is referred to as a 341 meeting based upon the designation of the statute in the Bankruptcy Code).It is required by the Bankruptcy Code so that the debtor can be questioned about his assets and debts whileunder oath.
The meetingis conducted by a Trustee.
At the end of the meeting withthe Trustee will generally announce what he plans to do with the debtor’s property. This is usually referred to as a “Statement of Intentions”.
Unfortunately, even though the attorney may discusswith the client what to expect in a Creditor’s Meeting,the Statement of Intentions tends to be in Legalese and debtors frequently leave theproceeding uncertain of what the Trustee intends to do with their property. The following are three phrases you may hear and what they mean.
1) THE PROPERTY IS EXEMPT.
Property that is exempt cannot be sold (liquidated) by the trustee and is retained by the debtor. Exempt property will vary from State to State. There are a number of articles that discuss exemptions on this site.
2) THE PROPERTY IS UNWORTHY OF ADMINISTRATION.
Property that is unworthy of administration is property that, while not exempt, has little or no equity value. Simply put, it is not worth the time, effort and cost for the trustee to seize the item of property and sell it. This property is usually abandoned by the trustee and is also retained by the debtor.
Examples of property that is unworthy of administration could be things like costume jewelry, a high mileage, older model vehicle, and a small tax return.
3) THE PROPERTY IS ENCUMBERED.
An encumbrance is a secured debt such as a mortgage on your houseor a car loan. For most debtors the encumbrance from the secured debt willalso make the property unworthy of administration.
Finally, don’t be afraid to ask questions if you hear something said at the trustee’s meeting that you don’t understand. Bankruptcy lawyers and trustees use these terms on a regular basis: you don’t.
Although the trustee may feel uncomfortable answering certain questions, you should speak with your attorney to get your questions answered.
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