A 341 meeting of creditors for businesses is an informal process that allows the bankruptcy trustee appointed to your case to ask questions about your bankruptcy filing. The meeting will:

• be scheduled about 20 to 40 days after you file
• occur in a conference room without a judge present
• last less than ten minutes, on average, and
• will likely be the only hearing you’ll attend in a Chapter 7 bankruptcy

In this article, you’ll learn what to expect at a creditor meeting for businesses.

Before the 341 Meeting of Creditors

One of the trustee’s duties is to ensure that a business debtor has done everything required by bankruptcy law. For instance, a trustee will verify that the business has the proper authority to file by checking the following:

• A corporate resolution authorizing the bankruptcy must be included with a corporate petition.
• All general partners must consent to a voluntary filing.
• Sole proprietors. The filing itself serves as authority.

Businesses must also send the trustee verification documents before the meeting takes place. Corporate and partnership debtors will provide the most recently filed tax return or tax transcript seven days before the 341 meeting of creditors.

A sole proprietor has different requirements:

• tax returns
• bank statements
• income verifications, and
• other financials, such as profit and loss statements.

It’s not unusual for a trustee to ask for more documentation, and the debtor must comply if it’s a reasonable request. If a business fails to produce the documents, the trustee can take steps to force a business partner or officer to do so.

Failure to provide the documents 45 days after the filing date could result in an automatic dismissal on the 46^th day.

What Will Happen at the 341 Meeting of Creditors

Several bankruptcy filers will be scheduled for the same hour. You’ll want to check the posted calendar to see how many filers are in attendance and when your case will be called.

Once the meeting starts the trustee will likely:

• call roll
• explain the meeting process
• advise you to speak clearly for transcription purposes, and
• call each filer to the front in turn.

Once called, the trustee will verify your identity by checking a picture ID and Social Security card if you’re a sole proprietor. Other business representatives might or might not need to provide identification.

The trustee will place representatives under oath before asking questions. Filers in need of language translation should alert the trustee before the meeting date (translation services take place telephonically).

If a debtor doesn't show up at the 341 meeting, the bankruptcy case can be dismissed.

Trustee Questions Businesses Can Expect at the Creditor Meeting

The trustee is required to ask every filer standard bankruptcy questions. For instance, here are some of the questions you’ll be asked:

• Did you read and review your bankruptcy petition, including all of the schedules, before signing it?
• Was the information contained in the petition accurate when you signed it?
• Has anything changed since you signed the petition?
• Did you provide accurate copies of your tax returns?
• Did you list everything you own in the petition?
• Do you own or have an interest in any real estate?
• Did you list all of your creditors no matter who they are?
• Have you transferred any property within the last two years?
• Have you made any payments during the past year?
• Are you involved in a lawsuit?
• Are you entitled to receive any insurance proceeds?
• Does anyone owe you any money for any reason?

The trustee will also ask questions about anything unusual in your filing. Your bankruptcy attorney will likely be able to predict, and possibly even take care of, issues ahead of time.

Creditor Questions Businesses Can Expect at the Creditor Meeting

Creditors rarely show up, but they can also ask questions. Creditor questions are limited to the business's finances and conduct.

That said, a creditor will likely use the meeting as a fact-finding mission and inquire about financial practices that could open the door to a fraud or an alter ego claim, as well as any future business plans. All could give a business creditor an avenue to pursue its debt after the bankruptcy case.

For instance, you should anticipate questions on topics such as:

• the accuracy of information provided in a credit application
• the location of assets and property serving as collateral for a debt
• the use of business income, and
• plans to open a similar business.

If the trustee doesn’t need anything further, the trustee will conclude the meeting of creditors. Otherwise, the meeting will be continued to a future date.

After the 341 Meeting of Creditors

If the business has assets, the trustee will liquidate the property and distribute the funds according to timely-filed creditor proof of claim forms. The case won’t close until creditors get paid and the trustee files a final report with the court. The process can take six months to several years, depending on how difficult it is to sell the business assets.

In the meantime, if an individual (sole proprietor) files a Chapter 7 case, the creditor meeting will likely be the last thing the debtor has to do. The sole proprietor should receive a discharge of qualifying debt after three to four months, on average, even if creditors haven’t yet been paid.

Corporate debtors don’t receive a debt discharge in Chapter 7 bankruptcy because the business gets liquidated. A creditor can’t collect from a company that no longer exists.

Small Business Chapter 11 Cases

A Chapter 11 small business debtor will have more responsibilities—mainly because Chapter 11 cases are exceedingly complicated, expensive, and, as a result, rarely filed.

The meeting of creditors will occur in much the same manner as described above. However, before the meeting—or at the meeting, if necessary—the trustee will want to accomplish additional things, including:

• interviewing the debtor
• asking about the debtor’s business plan
• investigating whether the debtor can support it
• explaining the debtor’s obligations, including report filing requirements, and
• inspecting the debtor’s books, records and business, if necessary.

In this chapter, the business will receive a Chapter 11 debt discharge once the reorganization plan is confirmed (approved) by the court.

Learn why individuals must file for Chapter 11 bankruptcy when their total debt exceeds the Chapter 13 bankruptcy threshold amount.

Consult With a Bankruptcy Lawyer

Businesses—especially small businesses—don’t file for bankruptcy as often as many believe. The risks to the owners and shareholders can simply be too high to justify filing. Because each situation is unique, it’s always prudent to consult with a bankruptcy lawyer about a business bankruptcy filing.

For more information, read Frequently Asked Business Bankruptcy Questions.