As it is a legal proceeding, many people assume that if they file bankruptcy, they have to go to court to get relief from their debts. Since the idea of being cross-examined about their financial problems is a scary idea for many, some people put off filing bankruptcy for this reason, making their financial problems worse in the process. However, the good news is that most people that file bankruptcy never see the inside of a courtroom.
Meeting of the creditors
For the overwhelming majority of filers, the only proceeding that vaguely resembles a courtroom proceeding is the 341 meeting or meeting of the creditors. During this meeting, bankruptcy filers (who have their attorneys present) are asked questions about their debts by the bankruptcy trustee. Although this sounds like a stressful experience, in reality, it is a 5-10 minute relaxed meeting. In most cases, the creditors themselves do not end up attending the meeting, as it is not worth their time to do so.
In Chapter 7 cases, the purpose of the 341 meeting is to find out whether the filer has any nonexempt property that may be sold to pay their debts. Because of this, the questions asked during it are generally limited to the value of the filer's property, whether the filer fully disclosed their income and assets on their bankruptcy petition, and the specifics of the filer's monthly income and expenses.
Conversely, if the filer chooses Chapter 13 bankruptcy, the primary goal of the meeting is to make sure that the creditors are treated fairly under the repayment plan. Because of this, the questions asked during the meeting focus on the source and amount of the filer's monthly income, the amount of monthly expenses, whether the filer has dependents, and similar questions. Once the 341 meeting has been completed, the court holds a hearing to determine whether the proposed repayment plan should be approved. However, the attorney, not the filer, attends this meeting.
When do filers have to go to court?
Although most bankruptcy filers never go to court, there are some cases where court attendance may be necessary. For instance, filers will likely have to go to court if there is an adversarial proceeding. In most cases, this occurs because the filer's creditors have accused the filer of trying to defraud them. If this occurs, the filer must go through a normal court proceeding in order for it to determine the truth of these allegations.
In addition, individual filers may need to go to court if their creditors object to their attempts to discharge a debt, or if there is an objection to any exemptions the filer has claimed. However, these scenarios are very rare.
Simply put, if you fear having to go to court, you should not let this serve as an excuse to delay getting the help you need in bankruptcy. An experienced bankruptcy attorney can walk you through the process and help you get the debt relief that you are entitled to by law.