Question Delaying 341 Meeting - Debtor Hiding in BK Court to avoid paying Judgment

[Mistral]

I'm a Creditor in a Ch7 Case where the Debtor is using BK Court to avoid [or delay] paying a State Court Civil Judgment... I have many questions about delays caused by the debtor and how I should handle the risks, costs, and delays without incurring too much legal fees of my own.

Q1: Is there a limit to how many times the Debtor can reschedule / Fail to Appear / Continue the 341 meeting? Can they just drag out the 341 meeting and disclosures for years to delay liquidation and paying the Judgment?

This is a case which was converted to Ch 7 more than 6 Months ago - since then the Trustee has done 8 separate 2004 Exams on 3rd parties - the 341 meeting started in April - was continued more than a dozen times through May, June, July, August and now September... always continued because the Debtor is 'unavailable' or the debtor hasn't fully filed the required disclosures [missing disclosures]...

The Case has significant [Beyond 7 Figures] assets to be liquidated [and I believe enough assets to cover all the debts] ... so I believe it's unlikely to be dismissed for the debtor's lack of cooperation... so I'm wondering

Q2: Are there things the Trustee needs to complete or confirm [such as missing assets? pre-petition transfers?] before they begin the liquidation process? [It's not like the Debtor will be truthful and admit significant pre-petition transfers at the 341 meeting.]

Q3: How long does the liquidation process take? [how long can the debtor object, delay liquidation by failing to cooperate?] - How many approvals [Court approval] are required to proceed with liquidation?

It seems clear the Debtor doesn't much care about discharge from the way they are not cooperating with the Trustee, hiding [forgetting to disclose] assets, not showing up at the 341 meeting, changing their disclosure statements and not bothering with the required Financial Management course.... so I wonder ...

Q4: Is there any consequence for an uncooperative and untruthful debtor other than the eventual Denial of Discharge?

NOTE: Fraud was already proven in State Court - rendering at least some of the debts non-dischargeable [an A/P to determine non-dischargeability has been filed and is pending].

As the debtor isn't cooperating - and I expect the trustee will seek general Denial of Discharge I wonder...

Q5: is there any point in running up my legal fees to determine non-dischargeability of the debt incurred by Fraud?? [I figure a Denial of Discharge means all the debts are not discharged - so I think it's best to avoid running up my BK legal fees to avoid my particular debt being discharged]

NOTE: This case reminds me of Amber Heard [or Alex Jones] - where they apparently filed for BK Protection to avoid paying a Court Judgment - in those cases the debtor has assets and isn't in BK court seeking discharge. They are likely hiding and seeking to delay paying an Expensive Judgment by avoiding collection efforts.

BK Court can help people start fresh after they've made mistakes - but it can also be used to delay [or avoid?] Judgment Enforcement after they were caught and found guilty of lying or committing fraud...

[justbroke]

I'm a Creditor in a Ch7 Case where the Debtor is using BK Court to avoid [or delay] paying a State Court Civil Judgment... I have many questions about delays caused by the debtor and how I should handle the risks, costs, and delays without incurring too much legal fees of my own.

I'm not a licensed attorney, but I'll give my thoughts. If the debtor filed a Chapter 7... then it's not a delay. A Chapter 7 is a liquidation and the Chapter 7 can continue even if the debtor wants it to end. This is much different than an entirely voluntary Chapter 13.

Q1: Is there a limit to how many times the Debtor can reschedule / Fail to Appear / Continue the 341 meeting? Can they just drag out the 341 meeting and disclosures for years to delay liquidation and paying the Judgment?

Debtors don't reschedule or continue a 341 Meeting. The Chapter 7 Trustee is the only one that can continue or reschedule a 341 Meeting.

This is a case which was converted to Ch 7 more than 6 Months ago - since then the Trustee has done 8 separate 2004 Exams on 3rd parties - the 341 meeting started in April - was continued more than a dozen times through May, June, July, August and now September... always continued because the Debtor is 'unavailable' or the debtor hasn't fully filed the required disclosures [missing disclosures]...

Well, this reads as though, if there are 8 2004 Exams, the Trustee is driving the show. The Chapter 7 Trustee can continue the liquidation even without the debtor's cooperation.

The Case has significant [Beyond 7 Figures] assets to be liquidated [and I believe enough assets to cover all the debts] ... so I believe it's unlikely to be dismissed for the debtor's lack of cooperation... so I'm wondering

Mine was over 7 figures as well.

Q2: Are there things the Trustee needs to complete or confirm [such as missing assets? pre-petition transfers?] before they begin the liquidation process? [It's not like the Debtor will be truthful and admit significant pre-petition transfers at the 341 meeting.]

Yes. In a Chapter 7 that has assets, known as an asset case, the "administration" of the case can take years. That's normal. If there are significant assets, expect the case to take at least 1 year for the Trustee to liquidate the estate and litigate. It reads to me that there were/are already 8 2004 Exams on third parties, so this Trustee is chasing the money (assets).

Q3: How long does the liquidation process take? [how long can the debtor object, delay liquidation by failing to cooperate?] - How many approvals [Court approval] are required to proceed with liquidation?

It can take years.

It seems clear the Debtor doesn't much care about discharge from the way they are not cooperating with the Trustee, hiding [forgetting to disclose] assets, not showing up at the 341 meeting, changing their disclosure statements and not bothering with the required Financial Management course.... so I wonder ...

Q4: Is there any consequence for an uncooperative and untruthful debtor other than the eventual Denial of Discharge?

A debtor does not need to show up at the 341 meeting unless required. Usually a debtor shows for the first, but any "continued" 341 meeting is administrative in nature and is the Trustee and the debtor's attorney trying to figure out the size of the bankruptcy estate.

NOTE: Fraud was already proven in State Court - rendering at least some of the debts non-dischargeable [an A/P to determine non-dischargeability has been filed and is pending].

Then why worry about this? If you are worried about timing, well... bankruptcy court is slow especially in a Chapter 7 asset case with significant assets to liquidate.

As the debtor isn't cooperating - and I expect the trustee will seek general Denial of Discharge I wonder...

No. Not if there are assets to administer. The Trustee can continue to liquidate without the debtor. I would think a Chapter 7 Panel Trustee will continue this especially since they already spent more than $70 on the case. (They only make $70 if they find nothing to administer/liquidate.)

Q5: is there any point in running up my legal fees to determine non-dischargeability of the debt incurred by Fraud?? [I figure a Denial of Discharge means all the debts are not discharged - so I think it's best to avoid running up my BK legal fees to avoid my particular debt being discharged]

I'm sure you have an attorney. If you don't then an attorney might tell you that fraud is hard to prove. Bankruptcy court may use a different definition of fraud than you're using or you think they should use. Bankruptcy's concept of fraud centers around intent to pay and inability to pay despite incurring the debt (again, no intention to pay).

BK Court can help people start fresh after they've made mistakes - but it can also be used to delay [or avoid?] Judgment Enforcement after they were caught and found guilty of lying or committing fraud...

Yes. Bankruptcy employees an automatic stay which stops all attempt to collect. For your reference, a person isn't found guilty in a civil court. It would not matter anyhow. It depends if the debt is dischargeable in the bankruptcy court. That's why, if there's a question of dischargeability, the creditor through his/her attorney should file a dischargeability complaint. These are not cheap and are fraught with all the issues with a civil trial.

I must ask, are you represented by an attorney in the adversary proceeding?

[Mistral]

Thanks for your feedback ... please see my response / comments / thoughts below....

I'm not a licensed attorney, but I'll give my thoughts. If the debtor filed a Chapter 7... then it's not a delay.

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The debtor didn't actually file a Chapter 7 - Debtor filed a Chapter 11 - the BK Court imposed a Trustee - the Trustee then converted to Ch7 Six months ago while citing the debtor's failure to cooperate and not being forthcoming nor timely.

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justbrokeA Chapter 7 is a liquidation and the Chapter 7 can continue even if the debtor wants it to end. This is much different than an entirely voluntary Chapter 13.

justbroke Debtors don't reschedule or continue a 341 Meeting. The Chapter 7 Trustee is the only one that can continue or reschedule a 341 Meeting.

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Yes - the Trustee continues the 341 meeting. When the debtor advises they are absent / unavailable / out of the Country or hasn't provided the required disclosures - then the trustee simply reschedules the meeting [happened a dozen times now]. I'm not sure whether nor how a Debtor's exam can take place without a DEBTOR present - but the 341 has been rescheduled repeatedly due to the unavailability of the debtor.

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justbroke Well, this reads as though, if there are 8 2004 Exams, the Trustee is driving the show. The Chapter 7 Trustee can continue the liquidation even without the debtor's cooperation.

justbroke Mine was over 7 figures as well.

justbroke Yes. In a Chapter 7 that has assets, known as an asset case, the "administration" of the case can take years. That's normal. If there are significant assets, expect the case to take at least 1 year for the Trustee to liquidate the estate and litigate. It reads to me that there were/are already 8 2004 Exams on third parties, so this Trustee is chasing the money (assets).

justbrokeIt can take years.

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Thank you for the painful truth - any idea or way I can accelerate this? Or is this something I need to simply be patient and wait?

Yes I suspect the Trustee will soon begin chasing the money ... doesn't appear to have even started yet....

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justbrokeA debtor does not need to show up at the 341 meeting unless required. Usually a debtor shows for the first, but any "continued" 341 meeting is administrative in nature and is the Trustee and the debtor's attorney trying to figure out the size of the bankruptcy estate.

justbrokeThen why worry about this? If you are worried about timing, well... bankruptcy court is slow especially in a Chapter 7 asset case with significant assets to liquidate.

justbrokeNo. Not if there are assets to administer. The Trustee can continue to liquidate without the debtor. I would think a Chapter 7 Panel Trustee will continue this especially since they already spent more than $70 on the case. (They only make $70 if they find nothing to administer/liquidate.)

justbroke I'm sure you have an attorney. If you don't then an attorney might tell you that fraud is hard to prove. Bankruptcy court may use a different definition of fraud than you're using or you think they should use. Bankruptcy's concept of fraud centers around intent to pay and inability to pay despite incurring the debt (again, no intention to pay).

justbroke Yes. Bankruptcy employees an automatic stay which stops all attempt to collect. For your reference, a person isn't found guilty in a civil court. It would not matter anyhow. It depends if the debt is dischargeable in the bankruptcy court. That's why, if there's a question of dischargeability, the creditor through his/her attorney should file a dischargeability complaint. These are not cheap and are fraught with all the issues with a civil trial.

justbroke I must ask, are you represented by an attorney in the adversary proceeding?

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I have an attorney - but after 8 years of dealing with attorneys, I've learned they don't always give me good advice, insight or direction so I try to do my homework.

An A/P has been filed for to find my specific debt is excepted from discharge based on 11 USC§523
§523(a)(2) [False Pretenses and actual fraud]
§523(a)(4) [Fraud while acting in Fiduciary Capacity]
§523(a)(6) [Wilful and Malicious Injury]
§523(a)(15) [Debt incurred in Divorce or Separation]

I believe I have a strong case for exemption from discharge - but even a strong case can require an expensive trial to win [not cheap and fraught with all the issues of a civil trial as you stated] - so I wonder if it's worth fighting the case to determine that my specific debt isn't dischargeable if the trustee is likely to file a general denial of discharge applicable to all the debts due to the debtors lack of cooperation, and not being forthcoming and hiding assets.

Q: If there ends up being a general Denial of Discharge aren't all debts not discharged? And thus my A/P becomes an expensive but pointless fight? Trying to understand this before I push for A/P trial to determine my specific debt is excepted from discharge at great expense.

I have an attorney - wondering if I should run up a large bill with this attorney to get my debt exempted from discharge ...

I've fought other things at great expenses and months later this turned out to be pointless to fight for various reasons... so now I'm trying to be judicious with my use of legal time and fees.

[justbroke]

There is either non-dischargeability of a specific debt or debts, or general dischargeability. The former is usually done by the United States Trustee (UST) and the latter by an individual creditor. Conversion to Chapter 7, from a Chapter 13 or a Chapter 11, is common where the Trustee believes there's something to recover for the unsecured creditors in a liquidation.

Bankruptcy is a strange duck when it comes to dischargeability issues. If you lose the AP then you lose all the money invested. That's why a thorough analysis or probability on success versus the amount spent and recovered is necessary. I'm of the opinion that probability and potential for wasted money is the reason that there are many more APs than we currently see.

For something that is subject to discharge, but may be non-dischargeable, I might look to 3-5 consultations with attorneys. If they all say it's a waste of time, that's pretty unanimous. If 1 out of 5 says maybe, that's still speculative. I don't know what you want to do, but if there's going to be a general denial of discharge due to the involuntary nature of the Chapter 7... the AP may become (or is) moot.

Just my thoughts. As they say in Vegas, you've got to know when to fold 'em.

[Mistral]

It's my understanding [Source: https://www.alllaw.com/articles/nolo...kruptcy.html]:

The bankruptcy trustee, the U.S. Trustee, or any of the creditors can file an objection to discharge. They have 60 days from the meeting of creditors to do so.

The trustees will usually object if you lied in your bankruptcy papers or otherwise failed to qualify for a discharge under the bankruptcy code. By contrast, most creditors don't want to waste litigation funds and will only ask the court to determine that its obligation is nondischargeable. Such creditor objections are normally specific to a debt based on when or how you took out that particular debt.

If there is a general objection to discharge - wouldn't that make my specific A/P [to except my specific debt from discharge] - moot or a costly and wasted endeavor?

[justbroke]

If there is a general objection to discharge - wouldn't that make my specific A/P [to except my specific debt from discharge] - moot or a costly and wasted endeavor?

I would hope that, should the UST/Trustee file a motion (or adversary) to deny the discharge, you would withdraw the complaint. If the person has no assets after the Trustee liquidates then it would be hard to justify continuing anyhow.