Monthly Archives: June 2013

Chapter 7 Bankruptcy Meeting of Creditors Transcript

Every Chapter 7 bankruptcy case has an initial court date called a First Meeting of Creditors (or 341 hearing) that is conducted by the Chapter 7 Trustee assigned to the case. The transcript below was produced by the Office of the United States Trustee (a component of the US Department of Justice).

This is a transcript of a hearing of one of our cases. The Debtors’ names have been censored to protect their privacy.

What you cannot see in the transcript is that this case was called out of order by the Chapter 7 Trustee. Trustee Nathan saw that I was prepared and called my clients’ case first, allowing them to leave court earlier than when they were docketed to be heard.

Please observe that I am very interactive with the Trustee during his examination of my clients. During the examination, I think it is clear that I am very familiar with the documents that were filed with the Court and the financial information that was used to prepare them. I handle each case start-to-finish, from the initial client consultation to document preparation to court appearances. I do not contract other attorneys to cover my court appearances.

UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF MICHIGAN

Case No. 13-48311

BEFORE KENNETH NATHAN, CHAPTER 7 TRUSTEE

341 hearing

Detroit, Michigan

Thursday, May 30, 2013

12:00 P.M. Call

THE TRUSTEE: Case number 13-48311 (Mr. Debtor) and (Mrs. Debtor). Step forward, folks. Raise your right hands.

(NAMES CENSORED), DEBTORS, SWORN

THE TRUSTEE: Have a seat.

EXAMINATION

Q. Did you review and understand the bankruptcy information sheet?

A. (Mr. Debtor) Yes.

A. (Mrs. Debtor) Yes.

Q. Starting with you, sir, state your name for the record, please.

A. (Mr. Debtor) (NAME CENSORED)

Q. And ma’am, your name?

A. (Mrs. Debtor) (NAME CENSORED).

THE TRUSTEE: Counsel, put your name on the record, please.

MR. ZOCHOWSKI: Good afternoon, Mr. Trustee. For the record Attorney Scott Zochowski on behalf of the Debtors.

BY THE TRUSTEE:

Q. Your attorney has placed in front of you folks some documents. Can you identify those as your bankruptcy petition, schedules and other related bankruptcy pleadings?

A. (Mr. Debtor) Yes.

A. (Mrs. Debtor) Yes.

Q. And is that your signatures that appear in each place you’re required to have signed them?

A. (Mr. Debtor) Yes.

A. (Mrs. Debtor) Yes.

Q. Each of you reviewed them in advance of signature?

A. (Mr. Debtor) Yes.

A. (Mrs. Debtor) Yes.

Q. And when you signed them, you were satisfied it was all truthful and accurate?

A. (Mr. Debtor) Yes.

A. (Mrs. Debtor) Yes.

Q. Still that way today?

A. (Mr. Debtor) Yes.

A. (Mrs. Debtor) (indiscernible)

MR. ZOCHOWSKI: (indiscernible)

THE TRUSTEE: You’ve got something you want to tell me about?

MR. ZOCHOWSKI: Yes. The ’97 Mercury Sable that was driven their adult son –

THE TRUSTEE: Uh-huh.

MR. ZOCHOWSKI: — has been in an auto accident in Ohio, and is totaled and in the possession of a sheriff’s department in Ohio. We have a letter from the sheriff.

BY THE TRUSTEE: Q. Is it insured?

A. (Mr. Debtor) There was no insurance on it. I mean it was insured, but not for collision or damage. So once they towed it —

THE TRUSTEE: Isn’t that required in the state of Ohio?

MR. ZOCHOWSKI: P.L.P.D. basically.

THE WITNESS: (Mr. Debtor) Right. Right. It was insured, but the — the wreckage is not insured. I mean —

BY THE TRUSTEE: Q. Okay. So there’s no money —

A. (Mr. Debtor) No.

THE TRUSTEE: Okay. Anything else?

MR. ZOCHOWSKI: Minor changes to Schedule F. There were some additional unsecured creditors they’ve received some bills post-petition —

THE TRUSTEE: All right.

MR. ZOCHOWSKI: — that were not on your credit report. We’re going to be amending the schedules to give them notice. But no other changes?

THE WITNESS: (Mr. Debtor) No.

MR. ZOCHOWSKI: Thank you.

BY THE TRUSTEE: Q. And have you folks ever filed for bankruptcy before?

A. (Mr. Debtor) No.

A. (Mrs. Debtor) No.

Q. Do you still reside at the address disclosed on your petition?

A. (Mr. Debtor) Yes.

A. (Mrs. Debtor) Yes.

Q. And that’s a home that you folks own; right?

A. (Mr. Debtor) Yes.

Q. And are you trying to keep the home?

A. (Mrs. Debtor) Yes.

A. (Mr. Debtor) Yes.

Q. And I’m — I’m interested in the value of that home, how we came up with the 100, what did we do to figure that out?

A. (Mr. Debtor) The home sits in a neighborhood where across the street there have been several foreclosures. There is property recently that went to auction that —

Q. I’m just wondering are there any homes similar to yours in the neighborhood?

MR. ZOCHOWSKI: We were seeing similar sales in the last year between 74,000 to 170.

THE TRUSTEE: That’s a big range.

MR. ZOCHOWSKI: It is a big range. Based on what were most similar in size, condition, age, that’s how we arrived at about $100,000, looking on the Zillow website of recent sales.

THE WITNESS: (Mr. Debtor) The property resides in an area where some of the homes will have lake frontage, and ours is a 1920 house that has like five feet access to lake frontage. So there’s a big range in the value in the area.

BY THE TRUSTEE: Q. Okay. Are you comfortable? You think that’s about right on your number, 100,000?

A. (Mr. Debtor) Right. I had insurance claim the other day, or an insurance person out that said they were going to cancel my insurance because I needed to repair stuff. So the house is in need of repair.

Q. Okay. And then let’s — what about the other property that you have an interest in, how did you come up with the value on that?

MR. ZOCHOWSKI: Stone Street?

THE TRUSTEE: Yeah.

MR. ZOCHOWSKI: This is property that (Mr. Debtor) owns jointly with —

THE TRUSTEE: I know.

MR. ZOCHOWSKI: — three family members. Looking at sales in that neighborhood, property values were ranging between 25,000 to 55,000 in the last year.

BY THE TRUSTEE: Q. And that’s another property that needs repair?

A. (Mrs. Debtor) It’s very dated. It’s very old. Yes.

Q. And who lives there?

A. (Mr. Debtor) My father. It’s been his home since 1975.

Q. Okay. Did he put you on there just for estate planning?

A. (Mr. Debtor) That was exactly the purpose.

Q. Okay. Any other properties that you’ve owned in the last two years?

A. (Mr. Debtor) No.

Q. Have you folks sued anybody in the last five years?

A. (Mr. Debtor) No.

A. (Mrs. Debtor) No.

Q. Thinking about suing anybody at this time for any reason?

A. (Mr. Debtor) No.

A. (Mrs. Debtor) No.

Q. Have you sold, transferred or given away any personal belongings or property of any type in the last few years?

A. (Mr. Debtor) No.

A. (Mrs. Debtor) No.

Q. Anybody owe you any money?

A. (Mr. Debtor) No.

A. (Mrs. Debtor) No.

Q. Anybody holding anything that belongs to you?

A. (Mr. Debtor) No.

A. (Mrs. Debtor) No.

Q. Are you entitled to any life insurance benefit or inheritance?

A. (Mrs. Debtor) No.

A. (Mr. Debtor) No.

Q. Own or operate any businesses?

MR. ZOCHOWSKI: Sole proprietorship.

THE WITNESS: (Mr. Debtor) I have a sole proprietorship that —

BY THE TRUSTEE: Q. What is that?

A. (Mr. Debtor) — that’s been in the arrears for years.

Q. What is it?

A. (Mr. Debtor) I — I worked for Port Huron Hospital for almost 30 years, and during that time, they were growing, and we were providing custom framing, diplomas and the interior artwork. So I was convinced, well before the economy tanked, that I should do that as a sole proprietor (indiscernible).

Q. (Interrupting.) Are you still doing that?

A. (Mr. Debtor) There’s no business. We have competitors in the area that will offer 50 percent off what I can do.

MR. ZOCHOWSKI: So that’s the d/b/a, Custom Cuts and Framing —

THE WITNESS: (Mr. Debtor) Right.

MR. ZOCHOWSKI: — that we placed on your schedules. And it has a few equipment items related to the business you described?

THE WITNESS: (Mr. Debtor) There are hand tools and mat cutters, saws, nothing of great value there.

BY THE TRUSTEE: Q. Are you trying to keep the home on Gratiot Avenue?

A. (Mr. Debtor) It’s our — it’s our home, and that’s the one we are trying to keep.

Q. (Interrupting.) Are you current on the payments?

A. (Mr. Debtor) We are.

Q. How are you maintaining the payments? I’m looking at your budget. You’re $2,400 in arrears each month.

MR. ZOCHOWSKI: They had exhausted retirement savings —

THE TRUSTEE: I know.

MR. ZOCHOWSKI: — account in the last year, and that’s why there’s a tax liability for 2012.

THE TRUSTEE: I get all that. But I’m just wondering how we’re going to pay for the house going forward.

THE WITNESS: (Mr. Debtor) I’ve applied — every day I apply for jobs. I have a second interview that they wanted to do today, and I put them off until tomorrow. So — at 56 I’m trying to find employment.

BY THE TRUSTEE: Q. I understand. I’m not — I’m not — I want to appreciate that you’re $2,400 in arrears, and you’re not going to reaffirm that debt, are you?

MR. ZOCHOWSKI: No, we wouldn’t be reaffirming it.

THE TRUSTEE: Just keep paying on it —

MR. ZOCHOWSKI: (Interrupting.) If they can. And we’ll see if they can possibly get a loan modification.

THE TRUSTEE: Right. I understand.

MR. ZOCHOWSKI: The bank has contacted my office for authorization to discuss a loan modification —

THE TRUSTEE: All right.

MR. ZOCHOWSKI: — directly with them.

THE TRUSTEE: Fair enough.

BY THE TRUSTEE: Q. Have you paid any money to any family members or close friends in the last year?

A. (Mr. Debtor) No.

A. (Mrs. Debtor) No.

Q. Have you paid your attorney in full?

A. (Mr. Debtor) Yes.

A. (Mrs. Debtor) Yes.

Q. All right. I’ve verified Social Security number, picture I.D. You’re all set for now.

MR. ZOCHOWSKI: Thank you very much.

(Hearing concluded.)

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Our Competitors: Sample Chapter 7 Bankruptcy Meeting of Creditors Transcript

Every Chapter 7 bankruptcy case has an initial court date called a First Meeting of Creditors (or 341 hearing) that is conducted by the Chapter 7 Trustee assigned to the case. The transcript below was produced by the Office of the United States Trustee (a component of the US Department of Justice).

This is a transcript of a hearing of one of our competitors. The “special appearance” referenced by the attorney means that she does not work for the law firm that the Debtor hired. She has been contracted by that office only to appear at the court date. She met the Debtor for the first time on his court date. Please notice the silence from the Debtor’s attorney at the hearing. The only things she says are “I’m sorry,” her name and “Thank you,” despite the fact that the Trustee is very aggressively examining her client.

What you cannot see in the transcript is that this case was actually called 3 times over 1 hour before the Debtor’s attorney arrived. The Trustee had to repeatedly send the Debtor outside to search for his attorney and expressed his frustration off the record. Additionally, the Trustee filed a motion almost immediately after this court date, challenging the relief the Debtor was seeking.

All bankruptcy attorneys must disclose their fee agreements in writing with the Court. I checked out this law firm’s fee agreement. Although the initial upfront costs appear low, per the fee agreement the law firm will be charging the Debtor significant additional fees for these additional court appearances that could have been avoided.

UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF MICHIGAN

Case No. 13-48156

BEFORE KENNETH NATHAN, CHAPTER 7 TRUSTEE

341 hearing

Detroit, Michigan

Thursday, May 30, 2013

11:00 A.M. Call

THE TRUSTEE: Case number 13-48156, (Debtor). Raise your right hand, please.

 (NAME CENSORED), DEBTOR, SWORN

 THE TRUSTEE: Where’s my questionnaire?

 MS. NIFOROS: I’m sorry.

 THE TRUSTEE: You can have a seat.

EXAMINATION

BY THE TRUSTEE: Q. Did you review and understand the bankruptcy information sheet?

 A. Yes.

 Q. State your name for the record.

 A. (CENSORED).

 THE TRUSTEE: Counsel, put your name on the record.

MS. NIFOROS: Thank you. Elaine Niforos by special appearance for Gudeman & Associates on behalf of (Debtor).

BY THE TRUSTEE: Q. Your attorney has placed in front of you some documents. Can you identify those as your bankruptcy petition, schedules and other related bankruptcy pleadings?

A. Yes.

Q. And is that your signature that appears in each place you’re required to have signed them?

A. Yes, sir.

Q. And did you review them before you signed them?

A. Yes.

Q. And at the time of signature were you satisfied it was all a truthful and accurate statement?

A. Yes, sir.

Q. Is it still that way today?

A. Yes, it is.

Q. Are there any changes you need to make to any of those documents today?

A. No.

Q. Have you ever filed for bankruptcy before?

A. No, never.

Q. And why are you filing now?

A. Just no income.

Q. When did that stop?

A. About four years ago.

Q. So you haven’t had any income in four years?

A. No. I was in school, then graduated, and haven’t been able to find a job.

Q. So you haven’t worked — when is the last time you worked?

A. 2007.

Q. Okay. Let’s take a look at your Schedule F. Spend a little time on that. So you haven’t worked since 2007. You have an open credit card with American Express. When is the last time you used that?

A. Over — over three, four years. Haven’t used it.

Q. So have you used it since 2007?

A. I don’t believe so, no.

Q. It says last active in 2008.

A. Could be.

Q. Could be, huh?

A. Yeah.

Q. You ran up $30,000 with American Express. How were you ever going to pay them back?

A. At that time I was working for real estate and —

Q. What’s the most you ever earned in one year?

A. (indiscernible)

Q. Most money you ever earned in one year working?

A. About 15,000.

Q. 15,000?

A. (No audible response.)

Q. Okay. You have $200,000 of unsecured debt. The most you ever earned in one year is $15,000. How did you ever think any chance you were paying this back?

A. It just got out of control.

Q. How did you get the credit? What did you tell them your income was to get 15 — to get credit making $15,000 a year? When they asked you what your income was, what did you tell them?

A. You know, I showed them tax return.

Q. No, you didn’t. You didn’t give your creditor – you gave American Express a tax return?

A. No, not American Express, no. It was a car lease.

Q. Okay. What about American Express? What did you tell them your income was to get credit? What did you tell Discover your income is?

A. I think recent — that was open in early on.

Q. What did you get at Flagstar Bank?

A. A loan.

Q. What kind of loan?

A. A motorcycle loan.

Q. How many years did you work before you stopped working in 2007?

A. I’d been working, you know, restaurant jobs and —

Q. And what was —

A. — part time while I was in school.

Q. But you — but you never had really a full-time job that paid any significant amount of money?

A. During summer I worked.

Q. Okay. Summer, a summer job?

A. (No audible response.)

Q. And what’s the — again, in one year, what’s the most you’ve ever earned?

A. I would say around that amount, 15,000.

Q. 15,000. Where did you get the money to pay your attorney?

A. My parents.

Q. Where did you get the money to live?

A. I just live with my parents.

Q. They pay for everything?

A. Essentially.

Q. Do you have student loans that you have — don’t — can’t pay back either?

A. Yeah. They’re all in default, and I filed for consolidation.

Q. Have you looked for work?

A. Yes.

Q. Can’t get any job at all?

A. For what I went to school for, I — I’ve applied and it seems they look at my credit and we just never speak again.

Q. Have you sold, transferred or given away an property of any type in the last couple years?

A. No.

Q. Sued anybody in the last five years?

A. Never, no.

Q. Anyone owe you any money for any reason?

A. No.

Q. Paid any monies to any family members or close friends in the last year?

A. No, never.

THE TRUSTEE: I don’t have anything further at this time. You’re all set.

MS. NIFOROS: Thank you.

(Hearing concluded.)

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