These programs are absolutely fascinating! I can’t comprehend that any attorney doing any appreciable amount of chapter 7 cases is not a member of this group and attending these meetings. The program consisted of two hours of debtor’s counsel asking questions and each of the trustees responding (although the most common answer by far was “it depends.”
Points that jumped out at me:
1. The trustees unanimously agreed that doing the 341(a) meeting by Zoom is great and will continue, certainly for now, and for some of them, hopefully forever. One benefit is that attendance by the debtors has increased since there are fewer excuses for not attending. More creditors are attending because it’s so easy to attend, trustees like creditors being involved (most of the time).
2. The trustees often make a “referral” to the appropriate agency when the debtors’ tax returns don’t jive with the schedules. The one apparently that comes up most often is when a married couple has filed separate returns and one or both has claimed “single” or one or both has claimed head of household.
3. When property is transferred pursuant to divorce, they often look at the entire divorce file. If the property division isn’t final (whatever that means), the property is still community property and entirely the property of the first to file.
4. The question was asked, “in small asset cases, what amount of value of assets does there have to be before a trustee will proceed to liquidate?” The answer of course was “it depends.” But the trustee pointed out that it depends in part on the amount of claims. If there is $5,000 in total claims, a small amount of assets will pay a large amount of claims. If the asset is easy to get and liquidate, i.e. cash in a bank, or a tax refund, it’s more likely to be administered rather than a no asset case. After that it depends on the difficulty in getting the asset, selling it, the tax consequences etc. So there’s no general amount that is not worth going after.
5. When the debtor owns an LLC or a corp, should the debtor list the corp’s assets and liabilities on the individual schedules? The answer is no (according to me) but the trustees commented that they absolutely look at the assets of the entity.
6. On debtor’s trying to convert the case to chapter 13, debtor’s counsel should immediately amend the schedules to show that confirmation of a chapter 13 plan is at least possible. The trustees agreed that they want something that makes sure that the case will be converted back to 7 if the 13 fails. There was a consensus that they are leery of these conversions and look carefully and object where appropriate, especially where the goal is clearly to try to get rid of the trustee.
7. Trustee’s don’t mind hiring debtor’s counsel to be special counsel when the attorney is familiar with something that helps administration. But there is no way an attorney can be paid by the estate – meaning never – unless counsel has been formally hired by the trustee which is approved by the court.
8. Debtor’s counsel needs to do due diligence re the assets of the estate. The topic was royalties or insurance commissions. When the trustee asks for those documents from debtor’s counsel, they are surprised that the attorney has no documentation meaning they did not look into it before filing. As to what they do with the royalties, sometimes they simply sell the cash flow stream, sometimes they keep the case open to collect the royalties, maybe even for a few years.
9. The program ended with each trustee stating his or her “requests,” or “reminders”:
- Send bank statements showing the balance in the accounts on the petition date and the tax returns 7 days before the meeting. One trustee said he reviews everything a week before the 341 so if you send it later, it’s likely the meeting is going to be continued.
- “Don’t ignore us.” “we aren’t going away.” “In fact, when you ignore us that makes us wonder what you’re hiding.”
- “Take notes at the 341.” The trustee commented that attys too often email her 2-3 weeks after the meeting and ask what they were supposed to provide.
- If the debtor is self employed, there should be a business on Schedule B. Even if the debtor is a plumber, there is a business that may or may not have value. (I’m not sure I agree with that.)
- One trustee said that if one spouse files and uses the 703 exemptions, he requires the waiver of the other spouse. He commented that he may be the only trustee that does that.
- One trustee commented that the debtor and counsel should read the Notice of Continuance of the 341 because it has instructions that he prefers be followed.