7 Things to Know about Creditor Examinations during Las Vegas Bankruptcy

In most Las Vegas bankruptcy cases the examination, which is somewhat confusingly referred to as the “meeting of the creditors” or more accurately as the “341 meeting” after its section number in the bankruptcy code, is really just a quick meeting with the bankruptcy trustee. The trustee asks the debtor a few questions to ensure his or her identity and awareness of what’s in the bankruptcy petition. In most examinations the creditors do not attend, and if they do they aren’t supposed to ask questions. It’s really the trustee’s show.

There is, however, a mechanism that allows creditors or any “party in interest” to conduct their own examination of the debtor. It’s authorized by Federal Rule of Bankruptcy Procedure 2004 [http://www.law.cornell.edu/rules/frbp/rule_2004], and allows the party to move the bankruptcy court to order the examination of any “entity.” Here’s what you need to know about non-Section 341 examinations.

(1)  Examinations beyond the one required in the bankruptcy code are very, very rare, especially in typical Las Vegas bankruptcies.

(2)  This examination will require the parties to argue a motion before the bankruptcy court. Sometimes the party in interest will win, but sometimes it might not.

(3)  The examination can be conducted against an “entity,” which means the creditor can peer into the inner workings of a business that’s owned by the debtor, not just the debtor’s finances.

(4)  The examination is limited in scope. The party in interest cannot ask anything it wants to about the entity’s affairs, but the scope is broad enough, including:

a.      Acts, conduct, or property or to the liabilities and financial condition of the debtor

b.     Any matter which may affect the administration of the debtor’s estate, or to thet debtors right to a discharge

c.      In Chapter 11, 12, and 13 cases: Any business and the desirability of its continuance,

d.     The source of any money or property acquired to be acquired by the debtor to be used in a repayment plan,

e.      Any other matter relevant to the case or creation of a repayment plan

(5)  The party in interest may ask the court to compel the entity to attend the examination and produce documents related to the examination.

(6)  The court order the debtor to undergo an examination at any time or place of its choice so long as one of the parties shows cause to do so.

(7)  Witnesses cannot be compelled to attend the examination unless the party in interest pays for a witness fee and mileage if appropriate.

This kind of examination is essentially a deposition that allows a creditor to question the debtor at length. They only occur if the creditor suspects the debtor committed fraud or some other bad faith statement in the bankruptcy petition and schedules, especially if the trustee missed it. With an experienced Las Vegas bankruptcy lawyer, you will be unlikely to worry about a second examination.

For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Haines & Krieger Las Vegas bankruptcy attorney for a free initial consultation. Call us at 1-702-880-5554 to set up your free consultation.

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