The Basics: The Chapter 13 “Meeting of Creditors”
The “meeting of creditors” is for finding any kinks in your payment plan, and hopefully straightening them out.
Chapter 13 “adjustment of debts” is all about “the plan.” The Chapter 13 plan is a detailed statement who you will pay, how much, and when, and also includes a bunch of related commitments. Everything about the Chapter 13 process, including its so-called “meeting of creditors,” revolves around getting the plan approved by the bankruptcy judge, and put into practice.
As such, the “meeting of creditors” is the opportunity to meet the Chapter 13 trustee, see what if any concerns he or she has to the plan that you and your attorney carefully crafted and filed at court. It may also be an opportunity to talk with any creditors who raise their concerns there, although more often those are done more efficiently by correspondence with your attorney or by filing an objection at the bankruptcy court, not at the “meeting.”
Similarities to the “Meeting of Creditors” Under Chapter 7
Just as with a Chapter 7 “straight bankruptcy” case, under Chapter 13 you are required to go to the “meeting of creditors.” (See our last blog, about the Chapter 7 “meetings of creditors.”) Your creditors have an opportunity to show up and ask questions, but just as in Chapter 7 most creditors don’t. And if any do show up, they tend to be special kinds of creditors specifically addressed in your payment plan, so having them there tends to help move the process along.
Also as in Chapter 7, the trustee will have a list of questions to ask you under oath. (In Chapter 13, sometimes the trustee’s attorney or other representative asks the questions.) Your attorney will prepare you for these usually straightforward questions, which often are intended to confirm or clarify the information you have already provided in writing. Your attorney will be there right next to you. Indeed often, and more so than in Chapter 7, a fair amount of the conversation during the meeting ends up being between the trustee and your attorney.
The Main Purpose of the “Meeting of Creditors” Under Chapter 13
The primary practical purpose of the Chapter 13 “meeting” is to find out if your proposed payment plan is going to satisfy the trustee, and perhaps the creditors. By the time of this “meeting” the trustee and/or his staff have reviewed the proposed plan and its supporting documents, so they are ready to raise any potential concerns.
A Chapter 13 plan has to follow a myriad of statutory and procedural requirements, and there can be room for disagreement about whether those requirements are being followed.
Nevertheless, in many cases, the trustee indicates at the “meeting” that the plan looks fine as you and your attorney are proposing it. If so, then the plan does not change (as long as there are no unresolved creditor objections), and the case moves ahead toward getting court approval of the plan.
Or the trustee may show at the “meeting” why her or she thinks the plan needs some minor adjustment(s), which your attorney will either briefly discuss with the trustee and potentially resolve, or else attempt to resolve in the following few weeks. Again, the goal is to get the plan ready for court approval.
Or finally in a minority of cases, the trustee raises serious concerns that require a significant reworking of the plan, or possibly even raise questions about Chapter 13 being the appropriate option for the debtor.
To give a hint of these bigger kinds of problems, take the example of a plan in which the calculations are based on the assumption that the debtor will be able to “strip” her second mortgage off her home’s title, and therefore would no longer need to make the monthly payments on it. This “stripping” can only be done if the home is worth less than the amount of the balance on the first mortgage. So if the debtor undervalued the home, and there is strong evidence that the “stripping” cannot take place because the home is worth more than that first mortgage balance, her plan calculations would be seriously out of whack. The monthly second mortgage monthly payment amount that she thought was available to pay into the plan would no longer be. The debtor and her attorney would need to decide whether to fight the trustee (and probably the second mortgage holder) about the value of the home, or to concede it is worth too much and recalculate the plan, or possibly even convert into a Chapter 7 case.
Most “Meetings” Have No Major Surprises
It’s realistic to be reminded that if your plan is carefully calculated and is based on solid assumptions, your “meeting of creditors” will most likely proceed smoothly. You’ll find out that the trustee has no objections, or only minor ones that are easily resolved. No creditors will come out of the woodwork with any surprising objections (although they can raise them as late as the “confirmation hearing” weeks later). You’ll leave the “meeting of creditors” with strong indications that your case has taken an important step towards the upcoming approval by the judge, and that you are on your way towards permanently settling down your financial life.