What is a “debtor’s exam” in a Chapter 11 bankruptcy?

A “debtor’s exam” in a Chapter 11 bankruptcy is a hearing where the debtor is required to answer questions about their finances and business operations. This hearing is held by the court and the creditors or other parties in interest that are involved in the case. During the exam, the debtor is questioned under oath about their assets, liabilities, income, expenses, business practices, and other financial matters. The purpose of the debtor’s exam is to uncover any fraudulent activity or mismanagement of funds, which can lead to the recovery of assets for the creditors. The debtor must attend the hearing and provide honest answers to the questions posed. If the debtor fails to adequately answer the questions, they may be subject to consequences such as criminal prosecution. In addition, the court may order the debtor to produce specific documents or other records in order to prove their statements. These records can include bank statements, income and expense statements, and a list of all assets and liabilities. The debtor’s exam is typically held roughly one month after the bankruptcy petition is filed. During the hearing, all parties involved in the case are allowed to ask questions and make motions or other requests to the court. At the conclusion of the hearing, the court will decide the outcome of the case, which may include approval of the Chapter 11 plan, dismissal of the case, or conversion of the case to a Chapter 7 liquidation.

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