The responsibility for concluding or adjourning a S. 341 meeting lies with the Trustee. That responsibility must be carried out and concluded before the date set for objection to the discharge of debtors.
The Meeting Of Creditors
The Bankruptcy Code provides that "[w]ithin a reasonable time after the order for relief in a case under this title, the United States trustee shall convene and preside at a meeting of creditors." 11 U.S.C. S 341(a).
The responsibility for concluding or adjourning a S. 341 meeting lies with the Trustee. That responsibility must be carried out and concluded before the date set for objection to the discharge of debtors.
The policy of the Executive Office of the United States Trustee as expressed in its "Handbook for Chapter 7 Trustees," states:
"RESCHEDULING AND CONTINUANCES
The trustee should consult with the United States Trustee about the local rules and practices regarding debtor rescheduling requests and continuances. The trustee should not routinely continue S. 341(a) meetings when the debtor appears. If a trustee must continue the meeting, however, the trustee must, if at all possible, announce the continued date to all parties present at the initial meeting, and advise the United States Trustee and, if necessary, the clerk of the bankruptcy court, of the continued date. Any continued or rescheduled meeting should be held before the time for objection to discharge has expired unless the trustee has obtained an extension of time to object to the debtor's discharge. If the debtor does not appear at a continued or rescheduled meeting, the trustee should ensure that action is taken for dismissal, unless dismissal would not be in the best interest of the estate."
According to the policy of the Executive Office of the United States Trustee as expressed in its "Handbook for Chapter 7 Trustees," the Trustee has a non-delegable function as the "Presiding Officer" at the debtors" 11 U.S.C. S.341(a) meeting of creditors. The pertinent portions of that handbook states:
"PRESIDING OFFICER
The trustee, as designee of the United States Trustee, is the presiding officer at the meeting of creditors. The trustee may not delegate the duty to preside at the meetings. However, the trustee may seek prior approval, confirmed in writing, from the United States Trustee for a substitute if the trustee is unable to preside at a scheduled meeting. If the United States Trustee designates another to serve as the presiding officer, the trustee is responsible to ensure that the designated substitute presiding officer is qualified and trained to conduct the meeting. The designated substitute presiding officer must have conducted meetings in the presence of the trustee prior to presiding at meetings without the trustee, unless the substitute is also a panel trustee. 28 U.S.C. S. 586."
The Relationship Of The Meeting To Claimed Exemptions
When an individual debtor petitions for bankruptcy he is entitled to claim certain property as exempt from the estate. See 11 U.S.C. S 522(b) (allowing debtor to elect to take exemptions provided by state or federal law); id. S 522(l) (requiring debtor to file list of property claimed as exempt); see also Fed. R. Bankr. P. 4003(a). Any creditor and the bankruptcy trustee may file objections to the debtor's list of properties claimed as exempt. See Fed. R. Bankr. P. 4003(b).
However, absent special circumstances, these objections must be filed "within 30 days after the conclusion of the meeting of creditors held pursuant to Rule 2003(a)." Id. If no objections are made, then "the property claimed as exempt . . . is exempt." 11 U.S.C. S 522(l).
Thus, the failure of the Trustee to conclude the meeting could have the unintended effect of leaving indefinite the time that creditors can object to a claimed exemption. In Taylor v. Freeland & Kronz, 503 U.S. 638 (1992), the debtor claimed a meritless exemption. Had the trustee or creditors objected to the claim within 30 days after the initial creditors meeting, as required under Rule 4003(b), the property could have been retained in the bankruptcy estate. Id. at 642. However, due to their failure to do so within that period, the Supreme Court ruled, prevented them from challenging the validity of the exemption later -"whether or not [the debtor] had a colorable statutory basis for claiming it." Id. at 644.
Rule 2003(e) permits adjournment "from time to time" and requires the trustee to announce "the adjourned date and time" if he chooses to exercise this option. The plain language of the statute requires that for a Rule 2003(e) adjournment to be effective, it must be accompanied by an announcement of "the adjourned date and time." See In re Hurdle, 240 B.R. 617, 621-22 (Bankr. C.D. Cal. 1999); In re Levitt, 137 B.R. 881, 883 (Bankr. D. Mass. 1992). No other procedure for adjournment is provided by rule or statute, and no other method of adjournment is permitted under Rule 2003(e).
The meeting may be concluded following a single session, or, under Bankruptcy Rule 2003(e), it *may be adjourned from time to time by announcement at the meeting of the adjourned date and time without further written notice.* Bankruptcy Rule 2003(e) has been understood to permit a continuance sine die. See In re Flynn, 200 B.R. 481, 483 (Bankr. D. Mass. 1996) ("The scant authority available agrees that "may" in Rule 2003(e) is permissive and not mandatory."). However, there is no statutory provision or bankruptcy rule "specify[ing] the manner in which the meeting is to be "concluded"" after it has been continued generally. See Moyer v Dutkiewicz (In re Dutkiewicz), 408 B.R. 103, 105 (B.A.P. 6th Cir. 2009) (citing In re Cherry, 341 B.R. 581, 585 (Bankr. S.D. Tex. 2006))
The Policy And Law Behind Concluding The Meeting Of Creditors
As the 9th Circuit noted in In re: Smith v. Kennedy, 255 F.3d 472 (9th Cir. 2000): "In Taylor, the Supreme Court emphasized its concern with keeping the bankruptcy process moving by insisting on firm, explicit deadlines. See 503 U.S. at 644. As a matter of policy, this should work no great hardship, even in the conversion of bankruptcy proceedings from Chapter 11 to Chapter 7. The purpose of the creditors meeting is to question the debtor about his debts, and to examine him about his claimed exemptions. Where more information must be gathered, the meeting can be adjourned to a definite time." However, if one is dealing with a serial adjournment of the meeting by the Trustee for reasons that are not anticipated by the code or case law, it is important to bring this to the court*s attention and seek to compel a conclusion of the meeting.
The 9th Circuit noted in In Re Smith v. Kennedy, 221 f.3d 1101 (2000) stated this policy of the rule succinctly as follows:
"Yet, the permissibility of such adjournments does not mean that they are to be commended or that the bankruptcy court should allow them in all cases. Often, a trustee can easily adjourn the meeting to a time certain, as provided in Rule 2003(e). A case-by-case analysis is appropriate. Trustees cannot keep these meetings open indefinitely without "legitimate grounds for believing that further investigation will prove fruitful." In re Bernard, 40 F.3d at 1031 n. 4. 28 U.S.C. S.586 may commit to UST discretion [to choose] among otherwise available means; but it does not give the UST "discretion" to use any means she fancies in any way she pleases. No part of 28 U.S.C. S. 586 authorizes the UST to act in an otherwise unlawful or abusive manner and excuse herself by pleading "discretion."
As the Supreme Court observed in Taylor, "[d]eadlines may lead to unwelcome results, but they prompt parties to act and they produce finality." 503 U.S. at 644. To authorize trustees to adjourn meetings indefinitely, even when it is unlikely that any subsequent meeting will in fact be called, would nullify the thirty-day requirement of Rule 4003(b), rendering the holding in Taylor hollow, and undermining the concerns expressed by the Supreme Court about promptness and finality.
The Court in In re: Smith, supra, observed that three lines of approach have developed within this circuit and elsewhere regarding the adjournment by the case Trustee of the 11 U.S.C. S.341(a) meeting of creditors. These have been referred to as the "bright-line" approach, the "case-by-case" approach, and the "debtor's burden" approach. Each is responsive to the demands of Taylor in its own way.
The "Debtor's Burden" Approach
The "debtor's burden" approach employed by the bankruptcy court in this case arose after Taylor because it had become commonplace for trustees to announce general continuances so they would not run afoul of the thirty-day objection deadline. See In re Flynn, 200 B.R. at 483. Adherents reason that a S. 341 meeting will not terminate until "the trustee so declares or the court so orders" because they oppose the adoption of a strict deadline "where none appears in either the statute or the rules." Id. at 484; see also In re Koss, 319 B.R. at 321. They also reject the uncertainty created under the case-by-case approach because "[a]n objector would never know whether the objection was barred as untimely until the court had investigated the circumstances of the case." Id. Certainty is obtained from either a clear statement of conclusion by the trustee or the issuance of an order to that effect issued upon the request of a debtor. Under this approach, the onus of concluding a meeting rests with the debtor because "the debtor has the greatest interest in concluding the meeting. . . ."" In re Dutkiewicz, 408 B.R. at 108 (citing In re DiGregorio, 187 B.R. 273, 276 (Bankr. N.D. Ill. 1995)).
As noted by the Dutkiewicz panel in its recent rejection of the "debtor's burden" approach, it has been spurned by the only two circuit courts to have addressed the issue:
In Smith, the Ninth Circuit Court of Appeals rejected the approach as paying insufficient heed to the Supreme Court's interest in firm, explicit deadlines as expressed in Taylor, 503 U.S. at 644, and the trustee's duty to keep the bankruptcy process moving. See In re Smith, 235 F.3d at 477 n.4. The Fifth Circuit rejected the approach as "ignor[ing] the clearly-established policy of the Bankruptcy Code of encouraging promptness in the filing of objections to exemptions, because it would permit a trustee to continue a meeting of creditors indefinitely." In re Peres, 530 F.3d at 378. Id. at 109-10.
The 9th Circuit in In Re Smith, supra, rejected the "debtor*s burden" approach for the reasons expressed above and because:
"(a) it shifts the burden of concluding the meeting from the convening officer to the debtor; (b) it requires the debtor to seek closure from the court on a motion to compel conclusion for cause - namely, "abuse" at the hands of the trustee, as stated by the bankruptcy court in this case; (c) it allows a trustee to enjoy an unlimited enlargement of the thirty-day objection period without ever seeking one from the court; (d) it fosters the delivery of evasive and confusing notices. Therefore, we have no cause to measure the trustee's conduct under the "debtor's burden" approach."
The "Bright-Line" Approach
Under the "bright-line" approach, a meeting continued without a follow-up date will be deemed to have been concluded on the date of the initial meeting for the purpose of determining the beginning of the thirty-day objection period. See Smith v. Kennedy (In re Smith), 235 F.3d 472, 476 (9th Cir. 2000); In re Friedlander, 284 B.R. 525, 527 (Bankr. D. Mass. 2002); In re Levitt, 137 B.R. 881, 883 (Bankr. D. Mass. 1992); see also U.S. v. Cushing (In re Cushing), 401 B.R. 528 (B.A.P. 1st Cir. 2009); McGowan v. Ries (In re McGowan), 226 B.R. 13 (B.A.P. 8th Cir. 1998) (discussing the implementation of the "bright-line" approach by local rule). The Ninth Circuit explained the benefits of the "bright-line" approach as follows: "To authorize trustees to adjourn meetings indefinitely, even when it is unlikely that any subsequent meeting will in fact be called, would nullify the thirty-day requirement of [Bankruptcy] Rule 4003(b), rendering the holding in Taylor hollow, and undermining the concerns expressed by the Supreme Court about promptness and finality." In re Smith, 235 F.3d at 476. According to the U.S. Bankruptcy Appellate Panel for the Sixth Circuit, "[c]ourts favoring this approach note that a bright-line rule provides certainty to trustees as to what assets are to be administered, and allows debtors to move on with their fresh start by allowing exemptions to become final within a definite and relatively short time." In re Dutkiewicz, 408 B.R. at 107 (citing In re Friedlander, 284 B.R. at 527; In re Levitt, 137 B.R. at 883).
Under the "case-by-case" approach, the facts and circumstances will be examined to determine the conclusion date of the S. 341 meeting. See Petit v. Fessenden, 182 B.R. 59, 63 (D. Me. 1995), aff*d on other grounds, 80 F.3d 29 (1st Cir. 1996). In affirming the bankruptcy court*s rejection of the "bright-line" approach, the district court in Petit stated, "[t]his is not a case such as Levitt, where a trustee adjourns a meeting indefinitely and then does nothing in the case for over a year." Id. In adopting this approach, the Fifth Circuit observed that courts "have considered at least four factors in determining the reasonableness of a trustee's delay in adjourning a meeting of creditors: (1) the length of the delay; (2) the complexity of the estate; (3) the cooperativeness of the debtor; and (4) the existence of any ambiguity regarding whether the trustee continued or concluded the meeting." Peres v. Sherman (In re Peres), 530 F.3d 375, 378 (5th Cir. 2008).
In conclusion, it is important to allow ample time to have the meeting of creditors and allow proper adjournment, but, there are considerations why adjournments must not be abused by the Trustee. In those circumstances, it will be proper to move to compel the conclusion of the meeting of creditors.
