Why Are There No Creditors At The "Meeting of Creditors"?

The prospect of the Meeting of Creditors causes a lot of anxiety for many of my clients. While this is understandable (the process is new to them), it is unfounded. There is very little to worry about during the Meeting of Creditors as long as you are honest and prepared.

A major cause of anxiety is the belief that your creditors will be present, and will cross-examine and grill you. People picture a courtroom setting with a judge and prosecuting attorney. Given the aggressiveness of collection agencies that have hounded them for months and sometimes years, debtors understandably believe a similar attorney will appear in an attempt to intimidate and belittle them. In reality, nothing could be further from the truth.

First of all, there is no judge and no courtroom. The Meeting of Creditors is conducted in a normal office room, in front of a "trustee", who is an attorney appointed to review the case. While there are bankruptcy judges and courtrooms, these only become necessary in complicated and disputed cases. The Meeting of Creditors is a much less formal affair. The trustee sits in the place of the creditors who are owed money, reviews the filing, and asks the debtor some simple questions. Your attorney will be at your side to assist you.

And this brings me to the point of there being no creditors at the Meeting of Creditors. As crazy as it sounds, there is normally no reason for them to show up. First of all, they would need to either hire and attorney or in-house council to appear, which is costly and time consuming. Given the fact that they have little hope of recovering any money in a Chapter 7 bankruptcy, this would be a waste of money for most creditors.

Second, the trustee acts in their place. If the debtor appears to have assets or income sufficient to pay their creditors, the trustee will take action. The trustee will object to the bankruptcy filing if there is anything improper about it. The trustee receives a cut of the recovery, and would thus be motivated to act on their behalf if something is available. With little in the way of rights, and very little chance of recovery, and the trustee sitting in their place, it is extremely rare when a creditor shows up. 

There is also little reason for the creditors to show up in Chapter 13 cases. Once again, there is a trustee sitting in their place. Also, the amount of money there are to be repaid is determined by the claim they file, not by a personal appearance.

The only situation when creditors may (rarely) appear is when they are "unsophisticated creditors". This means they are not a credit card or finance company. An example would be someone included on a personal loan, or an ex-landlord. These individuals know very little about the process, and when they receive a notice saying their rights may be affected, they will sometimes show up. Even then, not knowing anything about the process, they normally have very little to add.

The prospect of the Meeting of Creditors is daunting to many bankruptcy filers, but it should not be! The process is very straightforward, you will be very well prepared by my office, and most importantly, you creditors will likely not be at the meeting of their very name!

Contact us if you have any questions about the Meeting of Creditors in particular, or the bankruptcy process in general.