It is highly unlikely that any creditors will appear at your 341 hearing. Though creditors are given the opportunity to appear and ask questions they rarely do so. Approximately 30 to 45 days after your bankruptcy case is filed, you will need to attend a 341 hearing. The hearing gives creditors an opportunity to ask questions of you with regard to the information listed in your petition and schedules. However, in most cases, only you, your attorney, and the bankruptcy trustee actually participate in the hearing. I would estimate that in less than one percent of 341 hearings does a creditor actually appear.

What happens if a creditor does appear?

Once your trustee is through questioning you, he or she will ask if there are any creditors present who would like to question the debtor(s). If there are any creditors present they will come and sit at a specially designated table. Once they have introduced themselves and who they represent they will begin their questioning. Usually the creditor will ask you specific questions about the paperwork that was filed in your case. For instance, they might ask how you came to the value of a particular asset or why an asset they believe you still own was not listed. This is one more reason why you want an experienced bankruptcy in your corner when going through the bankruptcy process.

Why would a creditor appear?

Creditors usually appear in anticipation of filing an Adversary Proceeding. An adversary proceeding is a form of lawsuit that transpires within a bankruptcy. Creditors typically file an adversary proceeding when they want to convince the bankruptcy court that the debt you owe should still be paid even though you’ve filed bankruptcy. So if a creditor appears at your 341 hearing there is a good chance that they will file an Adversary Proceeding against you.

Why do creditors rarely appear?

First, it’s very expensive for a creditor to hire a bankruptcy attorney to represent their interests in your bankruptcy. Often the attorneys that represent creditors charge $400 - $500 an hour. Because it is so expensive for the creditors to hire an attorney they rarely do so unless the argument is over a lot of money and they feel they have a good chance of winning an Adversary Proceeding. The whole purpose of bankruptcy is to give debtors a fresh start and so courts are not inclined to require repayment of a debt by a bankruptcy filer except in extraordinary cases.

Secondly, your creditors must have a legal argument for why you should have to repay them. For instance, American Express can’t argue—“this person owes us money and we want it back"—that’s not a legal argument. Typically, creditors don’t have a legal reason for why you should repay them and therefore they don’t show to your 341 hearing.

As you can see bankruptcy is a very complex area of law and having an attorney in your corner can make the whole process much more enjoyable.