§ 56.3     Attending Meeting of Creditors
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 56.3, at ¶ ____, LundinOnChapter13.com (last visited __________).

Creditors have to be familiar with local practice to know whether to attend the § 341 meeting in Chapter 13 cases. In some jurisdictions, the meeting of creditors (or the hallway outside) is the critical moment in the Chapter 13 case when the important deals are struck. The valuation of collateral is accomplished; the monthly payments to secured claim holders are fixed; the percentage of payment to unsecured claim holders is calculated; the amount of payment into the plan is determined. Only by attendance at the meeting of creditors can a creditor be sure its rights have been protected. In other jurisdictions, the important questions are answered in advance of the meeting of creditors, between the § 341 meeting and the confirmation hearing or at the confirmation hearing; and attendance at the meeting of creditors is less important.


Especially in districts with large Chapter 13 programs, the meeting of creditors is often the key opportunity for creditors to distinguish the routine from the unusual case. If creditors attend the meeting of creditors and vocally oppose the debtor’s plan, the Chapter 13 trustee can be convinced that a particular case deserves special attention—further discovery or a separate confirmation hearing, for example.


The meeting of creditors is also an opportunity for creditors to question the debtor. The debtor is required to appear at the § 341 meeting and to submit to examination.1 However, because of crowded dockets and the disinclination of trustees, U.S. trustees and clerks of court to allow the meeting of creditors to become a discovery procedure, the opportunity for individual questioning by creditors is often limited at the meeting of creditors. Creditors have other more effective discovery rights, such as examination under Bankruptcy Rule 2004.2


In jurisdictions that schedule the confirmation hearing on the same day or immediately after completion of the § 341 meeting, the meeting of creditors is the last opportunity to negotiate a favorable treatment under the plan. In some jurisdictions, the notice of the meeting of creditors warns creditors that those with security interests may find that their collateral is valued at the § 341 meeting, that interest rates applicable to the payment of secured claims may be proposed, and the terms of repayment through the plan determined. The notice for the meeting of creditors often fixes deadlines for objections to confirmation, forcing creditors to cut their deals or file formal objections in advance of or soon after the § 341 meeting. Although there is no judicial officer present to force binding resolution of controversies,3 it is the truth about Chapter 13 practice in many districts that most disagreements between creditors and debtors are hashed out at or around the meeting of creditors. The creditor that fails to attend may find that the debtor’s proposed treatment is accepted at the meeting of creditors and that a confirmation order containing those terms is submitted to the court. The creditor is then in the disadvantageous position of challenging confirmation by motion to alter or amend the order of confirmation.4


For unsecured claim holders, the meeting of creditors is often the one realistic opportunity to determine whether the debtor is committing all disposable income for at least the three years required by 11 U.S.C. § 1325(b).5 Also, the meeting of creditors is an opportunity to determine whether unsecured claim holders are receiving at least what would be paid in a hypothetical liquidation under Chapter 7.6 Especially in cases in which the debtor proposes a deep composition—repayment of a small percentage of unsecured claims—creditors may have information or may be suspicious that the debtor has failed to reveal all assets or income. Aggressive questioning by unsecured claim holders at the meeting of creditors can inspire a Chapter 13 debtor to propose larger payments into the plan, a longer repayment schedule and a higher percentage to unsecured claim holders.


Creditors can appear at the meeting of creditors through an agent or through counsel.7 Rules that prohibit corporations from appearing before courts except through an attorney do not prevent a nonlawyer agent of an incorporated creditor from questioning the debtor at a § 341 meeting. However, in many jurisdictions, important rights are determined at the meeting of creditors, and the best protection may be through representation by counsel. Representation by counsel is especially important in nonroutine cases.


Child support creditors “or their representatives” are permitted to “appear and intervene without charge, and without meeting any special local court rule requirement for attorney appearances, in any bankruptcy case or proceeding in any bankruptcy court or district court of the U.S. if such creditors or representatives file a form in such court that contains information detailing the child support debt, its status and other characteristics.”8 Child support creditor’s can appear personally at the meeting of creditors and question the debtor or can be represented at the meeting of creditors.9 “Representatives” seems broad enough to include nonlawyer agents. The form promulgated by the Director of the Administrative Office of the U.S. Courts in early 1995 requires a certificate of representation under penalty of perjury and a summary of the child support debt owed by the debtor.


For all creditors, obtaining a commitment from debtor’s counsel concerning treatment under the plan in advance of the meeting of creditors is the most efficient way to represent a creditor. Attending the meeting of creditors is unnecessary if the terms of the commitment will not be changed at the meeting of creditors.10 The decision by creditor’s counsel whether to attend the meeting of creditors often is a calculation whether debtor’s counsel can be trusted to follow through on the promised treatment under the plan.


Attending the meeting of creditors can be time consuming. Chapter 13 cases are often grouped together, and a notice indicating a case is set for 9:00 a.m. may signal that a dozen or more meetings of creditors are set at that time. A specific case may not be called for several hours.


Debtors’ counsel often have more than one case scheduled, and the trustee is involved in all cases; thus the § 341 meeting may be a hectic time for one-on-one negotiation. However, it is the practice of many debtors’ counsel to anticipate (to force?) attendance of creditors’ representatives at the meeting of creditors by avoiding negotiation with creditors until that time. The preferable practice is to complete negotiations before the meeting of creditors. A debtor’s counsel who fails or refuses to work with creditors in advance of the § 341 meeting provokes more aggressive positions from creditors and generates larger claims for expenses of collection by forcing creditors to attend the meeting.


1  See § 43.3  Personal Appearance by Debtor.


2  See § 66.4 [ Preconfirmation Discovery Rights of Creditors ] § 56.5  Preconfirmation Discovery Rights of Creditors.


3  See 11 U.S.C. § 341(c) (Bankruptcy judge is forbidden to be present.).


4  See Fed. R. Bankr. P. 9023, 9024.


5  See discussion of projected disposable income test beginning at § 92.1  In General.


6  See discussion of best-interests-of-creditors test beginning at § 90.1  In General: Plan Payments vs. Hypothetical Liquidation.


7  See § 24.2 [ Use of Paralegals and Representatives ] § 26.2  Use of Paralegals and Representatives. See, e.g., State Unauthorized Practice of Law Comm. v. Paul Mason & Assocs., 46 F.3d 469 (5th Cir. 1995) (Because § 341 meeting of creditors is not a judicial proceeding, nonlawyer agents can appear at the meeting to represent creditors without offending Bankruptcy Rule 9010(a)’s prohibition against the unauthorized practice of law.); In re Kincaid, 146 B.R. 387 (Bankr. W.D. Tenn. 1992) (Because § 341 meeting of creditors is not a trial or adjudicative proceeding, a bank’s nonlawyer employee or representative can appear on behalf of the bank and question the debtor at the meeting of creditors without engaging in the unauthorized practice of law in Tennessee.).


8  Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 304(g), 108 Stat. 4106 (1994).


9  See § 24.2 [ Use of Paralegals and Representatives ] § 26.2  Use of Paralegals and Representatives.


10  See discussion of modification of plan before confirmation beginning at § 114.1  Timing, Procedure and Form.