Scope of Examination for 341 with Trustee

My morning ritual involves reading Colliers while enjoying my homegrown coffee beans that I roast myself  (coffee snob?  absolutely!).  I stumbled across this great piece of information from Collier’s re: scope of 341 examination with the trustee.  I particularly enjoyed reading the legislative history of what the trustee can/cannot ask.  Turns out the 341 examination is not a carte blanche, ask anything you want type of meeting.  Nay!

If you represent debtors and attend 341(a) meeting of creditors then you should read the below….

Copied directly from Colliers…

Although Rule 4002 requires the debtor to submit to an examination, it does not require the debtor to answer every question asked during the examination. The scope of the examination permitted is broad, but not unlimited.

The scope of the examination permitted at both the section 341(a) meeting and an examination under Federal Rule of Bankruptcy Procedure 2004 is governed by Rule 2004.  The examination may relate only to the acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor’s estate.

The legislative history states that the purpose of this examination is solely informational, and “it is not intended to be an interrogation to which the debtor must give any specific answers or which could be used against the debtor in some later proceeding.“  It is also not intended to convince the debtor to take any particular action, such as dismissing the case, converting to a different chapter, or reaffirming a debt.  As the legislative history also states, the trustee is in no position to predict whether any of these steps would affect the debtor’s credit standing.  (MY OPINION — if the testimony your client will give will incriminate him/herself in way that will lead to the trustee or creditor to gain information that will lead to a 523/727 action…then instruct them not to answer).

The legislative history of section 341(d) suggests that trustees may wish to give some of this information to debtors in writing in advance of the examination and simply ensure that they have read it.  That procedure is followed in most places and avoids substantial expenditures of time and wasteful repetition.  (This is those “green information sheets” — now you know why they exist).  

Disputes over whether a debtor is required to answer particular questions can be resolved only by the court. Since the court may not attend a section 341(a) meeting, and will generally not be present at an examination under Rule 2004(a), this may mean that the meeting or examination will have to be adjourned if a ruling is necessary on relevance, privilege or a refusal to answer on some other ground.  If a debtor refuses to answer a question on the grounds that the answer may be incriminating, the provisions of Code section 344 apply.   I looked up section 344 titled “self-incrimination/immunity” and states “Immunity for persons required to submit to examination, to testify, or to provide information in a case under this title may be granted under part V of title 18.”

 

Moral of the story — the trustee’s or a creditor’s examination is not a free for all questions.   If you think your client’s testimony about what he did with the car will incriminate him to the extent that it will lead to facts to support a 523/727 action — then instruct him not to answer or if the testimony may lead to the US Trustee’s Office filing criminal action, then instruct your client not to answer and seek immunity under section 344.”    You as counsel have a duty to listen and be informed and not let your client babble away.

One Reply to Scope of Examination for 341 with Trustee

  1. I love the article, I learned a lot. I have a comment though, about an instruction not to answer. Use it sparingly as you may be personally held liable for sanctions in a subsequent motion to compel.

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