Bankruptcy Horror Story #5: The Perils of Not Preparing For The Meeting of Creditors

I spent two hours today waiting for my client’s Chapter 7 case to be called.  The time culprit was an earlier case that took almost an hour.  Once this case was called by the Chapter 7 Trustee, it was obvious that the debtor’s attorney never prepared his client for the hearing resulting in the debtor not answering questions, changing his answers, and making conflicting statements.  The Trustee immediately stated that the debtor was not prepared, responded to every one of the debtor’s answers with 3 more questions, as it was obvious the Trustee did not believe the debtor and thought the debtor was untruthful.

The debtor stated that he lived at the address that he stated on his petition and then contradicted that statement by stating that a piece of machinery was at that address, but was not in his possession.  The Trustee asked “how can you live at this location and the machine is at this location, but you do not have control over it?”  The debtor grew silent, hoping his attorney would say something.  After a minute of silence the debtor stated “ah ah ah ah, I live with my girlfriend, but I get my mail at the address.”  The Trustee’s response, “so you do have control of the machinery, since you have access to the property.”  Finally, the debtor said “yes,” but by this time the debtor crossed the Rubicon, wherein the Trustee did not believe anything he said.   The matter was continued for the debtor to provide numerous documents and declarations to the Trustee and the matter was referred to the United States Trustee.

Was the case complex?  Yes, but if the attorney would have prepared his client for the questions, particularly the questions that were going to consists of explanations, the matter would have gone smoothly, the debtor’s integrity would not have been destroyed and the matter not having to be sent to the United States Trustee.  The debtor will have an uphill battle getting his discharge.

Rule of thumb regardless of how simple or complex a Chapter 7 case is:  a day or two prior to the meeting of creditors, the attorney, not a paralegal, must go through the petition with the debtor.  Explain the process, go over the questions each Trustee asked at the hearing, and if the answer is not “yes” or “no” discuss with the debtor how to respond.

I go through each case with my client and look at the petition as if I was the Trustee.  I go through a mock examination with each client and if a question is likely to lead to an explanation, my client and I formulate an answer that is simple, short and to the point, so the Trustee understands.  If the client has any difficulty articulating the answer, I will ask the Trustee if I can explain, so the matter is resolved.

The 10 to 15 minute conversation with your client can prevent having to spend hours providing documents, declarations and having the matter continued.  Worst of all, you caused your client distress and anxiety that could have been prevented by a 15 minute conversation.