What Happens After My Chapter 7 Meeting of Creditors?

The Chapter 7 Trustee in a Chapter 7 bankruptcy case is under a duty to corral the non-exempt assets, if any, liquidate those assets (turn the assets into cash), and distribute the cash proceeds to the creditors with allowed claims. Once the meeting of creditors has been concluded, the Chapter 7 Trustee’s real work begins, though.

The Chapter 7 trustee will normally go back and review your petition, schedules, and other related documents, along with your answers to the questions presented at the meeting of creditors. They will then need to decide what course of action they wish to take.

  1. No distribution: The trustee can issue a report of no distribution. This means that, after an extensive search, there are no assets that the trustee believes can be liquidated to pay creditors. If the trustee believes that there will be no meaningful distribution to the creditors, the trustee will probably take this action. This happens in about 40% of cases on average in Florida, if I had to estimate.
  2. Objection: The Chapter 7 trustee may file an objection to the debtor’s claims of exemption. If this happens, the trustee is questioning whether the debtor applied their exemptions properly and now asks the court to disallow what the debtor is attempting to protect. The trustee may question the value of assets and the amount that the debtor listed as the value of the asset, or the trustee may question whether an exemption that the debtor has taken is applicable at all. Either way, the trustee is asking for the court to make a determination as to whether the debtor is lawfully entitled to claim certain exemptions and protect certain property.
  3. Additional information: The Chapter 7 trustee may ask the debtor for additional documentation. Normally when this happens, the debtor hasn’t provided all the information that the trustee needs to make a determination as to which direction to take the Chapter 7 estate, or the debtor provided a response to a question at the meeting of creditors and the trustee will need additional documentation to either clarify or understand what the debtor meant. Sometimes this happens when a debtor has a piece of property out of state. The chapter 7 trustee may need an appraisal on the property. Of course, there are many other reasons the trustee may have questions because each Chapter 7 bankruptcy filer brings different facts and circumstances to the trustee’s attention. Or a creditor may have reached out to the trustee and provided the trustee with additional information that led the trustee down a different path. This could happen when a person files bankruptcy individually and they had closed down a small business.

For example, let’s say I owned a pool installation company, and I took 30 deposits on pools for a fixed price. But then the economy took a turn for the worse, and I may no longer be able to complete those pools for that fixed price, and the losses might force me into bankruptcy. In this scenario, many people may lose all or most of their deposits and they will be upset. They may reach out to the trustee with information for the trustee to investigate why their deposits are on the brink of disappearing.

Waiting for a Discharge & Answers

After the meeting of creditors, the Chapter 7 debtor can only wait for their discharge and answer questions posed by the trustee or provide documents requested by the trustee. We always tell our clients that no news after the meeting of creditors is good news.

For the Chapter 7 debtor to get their discharge, they are under a duty under the bankruptcy code to cooperate with the Chapter 7 trustee, so when the Chapter 7 trustee makes a request, the debtor must comply if the requested items are in their possession, or they can be reasonably ascertained.

If you are exploring your options and considering filing for bankruptcy protection, we offer a free consultations to anyone considering filing for Chapter 7 or Chapter 13. During the free consultations, you will meet with a bankruptcy expert who can answer all your questions and provide you with a roadmap to help you solve your financial problems. If bankruptcy is an option, the entire process will be explained to you clearly and honestly. Together, we can help you make a great financial decision for yourself and your family. Contact us online now to learn more.