Behind The Curtain—Chapter 11 From The Inside—Chapter 7—The US Trustee

The prior chapter of Behind The Curtain can be found with the following link:

MORE FROM FORBESBehind The Curtain-Chapter 11 From The Inside-Chapter 6-Financial Information

Now that the Schedules and SOFA have been filed, the next thing to happen will be Brett’s first meeting with the Office of the US Trustee. The Office of the US Trustee is part of the Department of Justice. Each office has attorneys and various staff members. Before the case was filed, Brett said that one of the few things he knew about bankruptcy was there is someone called the trustee. Jeff explained that, when most people hear about the trustee, what they are thinking about is a Chapter 7 trustee.

A chapter 7 trustee is different than the US Trustee. A chapter 7 trustee is a private citizen (most of the time an attorney, but not necessarily so), who is appointed by the Office of the US Trustee to oversee Chapter 7 cases. Since we are dealing with Brettco’s chapter 11, we don’t have to address the concept of the chapter 7 trustee.

The role of the US Trustee is to monitor all chapter 11 cases and, where appropriate, file motions or object to motions filed by the debtor and other parties. In the jurisdiction where the Brettco case is pending, each attorney in the US Trustee’s office is assigned to a different judge. Tom is the staff attorney who is assigned to all of the cases in front of Judge Hinds (the judge in the Brettco case). Tom has been the assigned US Trustee attorney in many of Jeff’s cases and they know each other well. Right after the case was filed, Jeff called Tom to tell him a little about the case.

A few weeks after the case is filed, there will be an informal meeting called the Initial Debtor Interview. Brett and Jeff will meet with Tom. They will discuss the bankruptcy process in general and certain things that will be specific to the Brettco case.

In larger cases (such as Hertz), the US Trustee will ask the largest unsecured creditors if they want to form what is called a committee of unsecured creditors (the “Creditor’s Committee”). If one is formed, the Creditor’s Committee will represent the interests of all of the unsecured creditors. That way, a creditor who is owed a small amount of money doesn’t have to hire an attorney. The US Trustee sends out a questionnaire to the largest creditors to see if there is interest in forming a Creditor’s Committee. If there is, usually there will be what is called an organizational meeting, where the creditors meet. Among the things they will do is to hire an attorney. Attorneys make a pitch to be hired. The Creditor’s Committee’s attorney is paid by the debtor.

Most small business cases do not have creditor’s committees and the Bankruptcy Code says that there are no creditor’s committees in Subchapter V cases. Since there was no interest in a Creditor’s Committee in the Brettco case, one was not formed.

Within 20-40 days of the filing of the Petition, something called the First Meeting of Creditors is scheduled. This is required under Section 341 of the Bankruptcy Code. Since, as was discussed in an earlier chapter, bankruptcy attorneys are not necessarily the most creative people, the First Meeting of Creditors is referred to as “The 341 Meeting.”

The 341 Meeting takes place at the US Trustee’s office and not in Court. During Covid, it happens by telephone. Brett is required to attend and Jeff will be there with him. Brett will then be asked questions, under oath, about Brettco. Brett will be asked why Brettco filed, his initial thoughts on how it will get out of bankruptcy, and, most important, Tom will ask questions about the Schedules and SOFA. Since Brett is about to experience two things that have never happened to him before, being placed under oath and being asked questions by someone from the Department of Justice, he is understandably nervous. Jeff, who has been through this many times, told Brett that the US Trustee has heard whatever the reasons are why Brettco had to file before and, even though Brett will be under oath since he was honest with the Schedules and SOFA (and, of course, is going to tell the truth), he doesn’t need to be nervous. Easy for Jeff to say, Brett thought since Jeff isn’t going to be the one under oath.

The day before The 341 Meeting, Jeff went through the Schedules and SOFA with Brett and pointed out things that he thought Tom might ask him about.

The other thing about The 341 Meeting is that any creditor (or their attorney) can attend and also ask questions. Jeff told Brett that very few creditors ever attend a 341 Meeting. At the appointed time, the Brettco case is called for its 341 Meeting. Brett is put under oath. The 341 Meeting is recorded. It goes just as Jeff said. Tom asked Brett what caused Brettco to file and his early thoughts as to how it would exit from bankruptcy. Tom went through the Schedules and SOFA (in much more detail that Brett thought he would, so Brett was happy for the call with Jeff the day before). Tom asked questions about how Brett valued some of the property, payments made to insiders, and whether there were any assets he might have forgotten to include (such as lawsuits). The whole thing lasted about 20 minutes. Tom then said that he had no more questions and The 341 Meeting was concluded. The recorder was turned off and Brett, for the first time in about an hour, exhaled.

After it was over, Brett had two thoughts. First, it wasn’t as bad as he thought it would be. Second, he was glad to have Jeff on his side, particularly with the time they spent going over the Schedules and SOFA before The 341 Meeting.

Earlier chapters of Behind The Curtain can be found at the following links:

MORE FROM FORBESBehind The Curtain-Chapter 11 From The Inside-Chapter 1

MORE FROM FORBESBehind The Curtain-Chapter 11 From The Inside-Chapter 2-The Initial Meeting

MORE FROM FORBESBehind The Curtain-Chapter 11 From The Inside-Chapter 3-Prefiling
MORE FROM FORBESBehind The Curtain-Chapter 11 From The Inside-Chapter 4-First Day Motions
MORE FROM FORBESBehind The Curtain-Chapter 11 From The Inside-Chapter 5-The Automatic Stay

Checkout latest world news below links :
World News || Latest News || U.S. News

Source link

Back to top button