Bankruptcy hearings can be over before the fat lady sings

fat lady singsA recent opinion from United States bankruptcy judge Henry Boroff in Massachusetts helps to clarify a much debated question of bankruptcy law: when is the debtor’s “meeting of creditors” really over?

Each person filing a bankruptcy case is required to attend a “Meeting of creditors,” also known as a “341 meeting” after the code section mandating it.

These hearings are usually routine, and usually involve the debtor fielding questions under oath from a bankruptcy trustee, rather than from creditors.

But in the Vierstra case, there was a dispute between the trustee and the debtor about a claimed homestead exemption — the debtor had moved out of the home she exempted when she separated from her husband, who still lived there. At the meeting, the trustee orally continued the hearing until some unspecified date in the future.

Later, the trustee filed a written objection to the homestead exemption, but the debtor was able to successfully argue that the objection was filed late, because the meeting of creditors was really over.

What came to this debtor’s rescue was an obscure provision that was inserted in to Bankruptcy Rule 2003 (e) in 2011, which says:

“The meeting may be adjourned from time to time by announcement at the meeting of the adjourned date and time without further written notice. The presiding official shall promptly file a statement specifying the date and time to which the meeting is adjourned.”

Because the trustee didn’t take the precaution of filing a statement with the court specifying an exact continuation date, the debtor in this case was granted her homestead exemption for a house she didn’t live in.

The rule is a good one, as it basically brings the curtain down on the practices of some trustees, who habitually “continue” hearings with no firm date in mind.

 

By Doug Beaton

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