01 Jan Bankruptcy: The Meeting of Creditors. What Did The Trustee Say?
Every person who files a bankruptcy is required to attend a Meeting of Creditors.
The meeting, also called a Section 341(a) meeting, is held by a Trustee.
The Trustee is an individual, usually an attorney or a certfied public account, who is responsible for reviewing the debtor’s bankruptcy to see if there are any assets available to pay the debt owed to unsecured creditors.
The meeting is usually scheduled to occur about one month after the bankruptcy is filed. Attendance is mandatory, and failure to attend can result in dismissal of the bankruptcy.
At the end of the meeting,the Trustee will announce what he plans to do with the debtorâ€™s property.
This is usually referred to as a â€œStatement of Intentionsâ€.
Unfortunately, the Statement of Intentions tends to be in Legalese, and debtors frequently leave the meeting 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.
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.
3) THE PROPERTY IS ENCUMBERED. (OR THE PROPERTY IS ENCUMBERED BEYOND ITS WORTH)
An encumbrance is a secured debt such as a mortgage or a car loan. For most debtors the encumbrance also makes the property unworthy of administration.
Finally, donâ€™t be afraid to ask questions if you hear something said at the trusteeâ€™s meeting that you donâ€™t understand. Bankruptcy lawyers and trustees use these terms on a regular basis: you donâ€™t.
However, understanding the terms used in bankruptcy as well as the process are important parts of having a successful case.
An experienced bankruptcy attorney can guide you through the entire process and will be able to bring the legalese down to earth.
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