by Hearthstone Legal Group | Feb 7, 2026 | bankruptcy, BANKRUPTCY LAW, creditors, debt relief, Real Estate
About 4 to 6 weeks after the debtor has submitted his / her / there / its Chapter 7 bankruptcy Petition, the debtor will appear in what is known as the 341 meeting. The 341 meeting is named for that section of the Bankruptcy Code, 11 USC section 341, which states, among other things, the following:
“(a)Within a reasonable time after the order for relief in a case under this title, the United States trustee shall convene and preside at a meeting of creditors.
“(b) The United States trustee may convene a meeting of any equity security holders.
“(c) The court may not preside at, and may not attend, any meeting under this section including any final meeting of creditors. . . . “
For most debtors, this is as close as they will ever get to a courtroom. It is also as close as they will get to the judge. Interestingly, the hearing does not take place in a courtroom, and the judge is not present.
The meeting is done in a conference room, with the debtor, the debtor’s attorney, if any, and the assistant United States Trustee. The debtor is under oath and the meeting is recorded on audiotape. There is no judge, no jury, and if the meeting goes well, the debtor will see none of these.
The Sec. 341 meeting is the debtor’s opportunity to confirm the accuracy of the information that she has submitted for consideration by the Bankruptcy Court, via the United States trustees office. The assistant United States trustee will ask if the bankruptcy forms, largely known as “schedules,” are complete and correct, whether there has been a change in the status of any asset or debt, whether any property has recently been transferred, and whether there are any pending lawsuits filed by or against the debtor, among other things. The trustee will ask about changes in title to any property within recent months. In other words, the trustee wants to know if there’s anything that would raise a red flag as property or debt that has not been disclosed, that has changed hands, or that has otherwise been wasted, destroyed, transferred, lost, or is not available for the bankruptcy trustee to seize or sell, if either is indicated by the bankruptcy petition and schedules.
The meeting, which is the culmination of many hours of compiling documents, usually lasts only 5 to 10 minutes. That is the best case scenario. If a debtor finds himself or herself coming back over and over again to give more information, that’s usually an indicator that the trustee feels that the documents are incomplete.
Creditors can also attend, to ask if property that they loaned to Plaintiff has gone missing, or to contest the amount of the debt disclosed by the debtor. It is very rare for creditors to appear at the garden variety Chapter 7 Sec. 341 meeting.
Assuming that the Section 341 meeting goes well, then the next steps are for the trustee to file a “report of no distribution”, stating that he or she did not find any assets to seize and sell, and then it will be up to the Clerk of the court to close the case. The whole process, from the 341 meeting ’til the closure of the case, could take a little as a week or so, or as long as a few months.
THIS POST DOES NOT CONSTITUTE LEGAL ADVICE, AND DOES NOT CREATE AN ATTORNEY-CLIENT RELATIONSHIP; PLEASE CONSULT AN ATTORNEY!!!
by Hearthstone Legal Group | Jan 26, 2021 | debt relief, Fair Lending
When representing clients, attorneys rely on the words of the law (a “statute”) and ask the court to implement the plain, obvious meaning of its words. When it comes to federal statutes, however, it is easy to overlook the “comments” by the lawyers for the Congressional committees that draft the statutes, or the agencies which implement them.
In a recent unanimous 9th Circuit decision by the Honorable Mary M. Schroeder, the comments to a consumer lending statute were critical to holding a bank accountable.
In Gilliam v. Levine, Case No. 18-56373 (9th Circuit, 2020), the court recounts that the borrower obtained a loan as trustee for a family trust. The purpose of the loan was to make home repairs. the home itself was the sole asset of the trust. Another family member, who occupied the home, with the trust beneficiary.
The home, i.e., the asset of the family trust, secured the loan.
The borrower later discovered that the due date for the final loan payment was 1 year earlier than she had been led to believe. The borrower was alarmed, and sued to cancel (rescind) the loan under federal law, Truth in Lending Act (TILA), 15 U.S.C. § 1601, et seq., and the Real Estate Settlement Practices Act (RESPA), 12 U.S.C. § 2601. The borrower also asserted a claim under California’s Fair Lending Law [Rosenthal Act], 1788.1(b) of California’s Rosenthal Act, California Civil Code §§ 1788.1(b).
This relief is only available where the borrower is a consumer. 15 U.S.C. § 1635(i)(4); 12 U.S.C. § 2606(a); Cal. Civ. Code § 1788.2(e). The trial court, Hon. Philip Gutierrez, concluded that because the loan went to the trust, it was not a consumer loan. The trial court dismissed the case.
The 9th Circuit reversed the trial judge. The appellate court noted federal Consumer Financial Protection Bureau’s Official Staff Commentary to Regulation Z (mortgage loans), which suggested the opposite result in this case. The Commentary, for example, stated that “[c]redit extended for consumer purposes to certain trusts is considered to be credit extended to a natural person rather than credit extended to an organization.” 12 C.F.R. pt.1026, Supp. 1, § 1026.3 Comment 3(a)-10.
The “certain trusts” that fall under the rubric of “natural persons,” entitled to protection for loans made to benefit a natural person, and not an organization, include the trust in this case, which was formed for tax or estate planning purposes [which benefit people]. As a result, where individuals invest assets in the trust, the regulation thus effectuates TILA’s definition of consumer credit transactions. 12 C.F.R. pt.1026, Supp. 1, § 1026.3 Comment 3(a)-10.
The trust in question was “primarily for personal, family, or household purposes.” 15 U.S.C. § 1602(i). The borrower was the aunt (as Trustee); the niece was the beneficiary; and the trust property was a private home. As a result, the loan was a “consumer credit transaction,” which was subject to the Fair Lending Laws. And the Comment makes the point: Look to the substance of the transaction. Here it was to benefit a consumer, not a company. 12 C.F.R. pt. 1026, Supp. 1, and § 1026.3 Comment 3(a)-10.i.
For as much as it has been vilified by certain political interests, the CFPB remains in force, and fortunately, it remains a source of protection for consumers. It will be interesting to see if the case if appealed to the Supreme Court (quite likely), and whether it will be upheld.
WARNING: THIS POST DOES NOT CONSTITUTE LEGAL ADVICE; PLEASE CONSULT AN ATTORNEY
#law #fairlending #mortgages #truthinlending #codeoffederalregulations #courts
