17 Aug Why Is It Called a “Meeting of Creditors?”
Why do they call the first bankruptcy hearing a “Meeting of Creditors?” It is frightening really. Sounds like a lynch mob will be there to meet you. In reality, almost no creditors ever come to these meetings. It’s like they’re throwing a party but no one shows up.
So why call it that if the creditors don’t want to have a meeting? Mostly tradition. The Bankruptcy Code still calls these hearings a “Meeting of Creditors” because that’s what it was called for much of modern American bankruptcy history.
Back when bankruptcy was a fairly uncommon event and creditors were mostly local bankers and businesses, the creditors could come to the hearing and largely run the show. In theory, they still could but it’s not worth it in consumer cases to even consider it.
When a trustee is appointed at the beginning of your case, she is legally only an “interim trustee.” It is only after the Meeting of Creditors is concluded that the “interim trustee” becomes the “trustee” for the case. During the Meeting of Creditors, the creditors are entitled to elect someone else to serve as trustee, if they can meet various qualifications. They can elect someone who does not normally work as a trustee or another trustee.
The expense and hassle of a trustee election is rarely ever worth it, especially since the advent of a panel of professionals who routinely serve in this capacity. Rarely would a non-trustee be as efficient as a regular panel member. I am unfamiliar with it ever happening in a purely consumer case and only rarely in business cases.
So in reality, the reason the hearing is called a “Meeting of Creditors” has a lot to do with something that never happens and is unlikely to happen in your case. Tradition and history still have a small place in the bankruptcy world.
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