What Is a 341 Meeting?

The term “341 meeting” refers to a meeting between creditors and debtors that is required to take place during the course of a Chapter 7 bankruptcy proceeding. Accordingly, its name is derived from section 341 of the bankruptcy code.

A 341 meeting is typically scheduled roughly one month after a debtor files for bankruptcy. To be considered legally valid, the meeting must include both the individual filing for bankruptcy and the court-appointed bankruptcy trustee.

How 341 Meetings Work

The 341 meeting is one of many stages involved in declaring bankruptcy in the United States. Its primary purpose is to establish the facts of the bankruptcy in question, and to ensure that all the paperwork necessary to carry out the bankruptcy proceedings are in order. Although the attorneys of the debtor and creditor are welcome to attend, the only parties whose presence at the 341 meeting is legally required are the debtor in question and the court-appointed trustee.

Prior to the 341 meeting, the trustee would have already reviewed the bankruptcy paperwork and financial records submitted by the debtor. The purpose of the 341 meeting, therefore, is principally for the trustee to confirm the facts stated by the debtor and to collect any additional paperwork that may be required. In the event that the debtor is attempting bankruptcy fraud, this would likely be detected by the trustee during or prior to the 341 meeting.

From the debtor’s perspective, the objective of the 341 meeting is to provide the necessary documents in order to prove that their identity is authentic, while also establishing their current assets, liabilities, income, expenses, and other relevant financial circumstances. If the creditors are in attendance, they will be able to ask clarifying questions, such as whether the debtor is entitled to any upcoming income sources, ie. tax rebates or inheritances, or whether the debtor owns undisclosed assets, such as shares in a private business or assets held overseas.

Real World Example of a 341 Meeting

Peter is a bankruptcy trustee currently presiding over a 341 meeting. The debtor present declared bankruptcy over a $5,000 debt, and has attended the meeting along with his bankruptcy lawyer. Likewise, the creditor and her lawyer are also present.

Peter’s first priority is to verify the identity and financial status of the debtor. Although Peter already reviewed many documents prior to the meeting, the 341 meeting provides an occasion to ask follow-up questions about the documents provided and to obtain any additional disclosures deemed necessary. In the unlikely event that the debtor were attempting bankruptcy fraud, this would also likely be detected due to discrepancies or inadequacies in the documents provided.

During the meeting, the lawyers for the debtor and creditor engaged in detailed conversation regarding the debtor’s assets, liabilities, and income sources; and were able to negotiate a general plan for the gradual repayment of the outstanding debt. As is the case with most 341 meetings, the meeting took place at Peter’s office, rather than in court before a judge.

What Is Anchoring and Adjustment?

Anchoring and adjustment is a phenomenon wherein an individual bases their initial ideas and responses on one point of information and makes changes driven by that starting point. The anchoring and adjustment heuristic describes cases in which a person uses a specific target number or value as a starting point, known as an anchor, and subsequently adjusts that information until an acceptable value is reached over time. Often, those adjustments are inadequate and remain too close to the original anchor, which is a problem when the anchor is very different from the true answer.

Understanding Anchoring and Adjustment

Anchoring is a cognitive bias described by behavioral finance in which individuals fixate on a target number or value—usually, the first one they get, such as an expected price or economic forecast. Unlike the conservatism bias, which has similar effects but is based on how investors relate new information to old information, anchoring occurs when an individual makes new decisions based on the old, anchor number. Giving new information thorough consideration to determine its impact on the original forecast or opinion might help mitigate the effects of anchoring and adjustment, but the characteristics of the decision-maker are as important as conscious consideration.

The problem with anchoring and adjustment is that if the value of the initial anchor is not the true value, then all subsequent adjustments will be systematically biased toward the anchor and away from the true value. However, if the anchor is close to the true value then there is essentially no problem.

One of the issues with adjustments is that they may be influenced by irrelevant information that the individual may be thinking about and drawing unfounded connections to the actual target value. For instance, suppose an individual is shown a random number, then asked an unrelated question that seeks an answer in the form of an estimated value or requires a mathematical equation to be performed quickly. Even though the random number they were shown has nothing to do with the answer sought, it might be taken as a visual cue and become an anchor for their responses. Anchor values can be self-generated, be the output of a pricing model or forecasting tool, or be suggested by an outside individual.

Studies have shown that some factors can influence anchoring, but it is difficult to avoid, even when people are made aware of it and deliberately try to avoid it. In experimental studies, telling people about anchoring, cautioning them that it can bias their judgment, and even offering them monetary incentives to avoid anchoring can reduce, but not eliminate, the effect of anchoring.

Higher levels of experience and skill in a specific field can help reduce the impact of anchoring in that subject area, and higher general cognitive ability may reduce anchoring effects in general. Personality and emotion can also play a role. A depressed mood increases anchoring, as do the personality traits of agreeableness, conscientiousness, introversion, and openness.

Anchoring and Adjustment in Business and Finance

In sales, price, and wage negotiations, anchoring and adjustment can be a powerful tool. Studies have shown that setting an anchor at the outset of a negotiation can have more effect on the final outcome than the intervening negotiation process. Setting a deliberate starting point can affect the range of all subsequent counteroffers.

For example, a used car salesman (or any salesman) can offer a very high price to start negotiations that are arguably well above the fair value. Because the high price is an anchor, the final price will tend to be higher than if the car salesman had offered a fair or low price to start. A similar technique may be applied in hiring negotiations when a hiring manager or prospective hire proposes an initial salary. Either party may then push the discussion to that starting point, hoping to reach an agreeable amount that was derived from the anchor.

In finance, the output of a pricing model or from an economic forecasting tool may become the anchor for an analyst. One possible way to counteract this is to look at multiple, diverse models or strands of evidence. Social psychology researcher Phillip Tetlock has found that forecasters who make predictions based on many different ideas or perspectives (“foxes”) tend to make better forecasts than those who focus on only a single model or a few big ideas (“hedgehogs”). Considering several different models and a range of different forecasts may make an analyst’s work less vulnerable to anchoring effects.

What Is an Automatic Premium Loan?

An automatic premium loan (APL) is an insurance policy provision that allows the insurer to deduct the amount of an outstanding premium from the value of the policy when the premium is due.

Automatic premium loan provisions are most commonly associated with cash value life insurance policies, such as whole life, and allow a policy to continue to be in force rather than lapsing due to nonpayment of the premium.

Understanding Automatic Premium Loans

In order to take an automatic premium loan, you have to have a cash-value life insurance policy, in which every premium you pay adds to the cash value of the policy. Depending on the policy language, life insurance policyholders may be able to take out a loan against the cash value of their policy. This accrued cash value is a value over and above the face value of the policy and can be borrowed against by the policyholder at their discretion.

An automatic premium loan is essentially a loan taken out against the policy and does carry an interest rate. If the policyholder continues to use this method of paying the premium, it is possible that the cash value of the insurance policy will reach zero.

At this point, the policy will lapse because there is nothing left against which to take out a loan. If the policy is canceled with an outstanding loan, the amount of the loan plus any interest is deducted from the cash value of the policy before it is closed.

Special Considerations

Since the accrued value is technically the property of the policyholder, borrowing against the cash value does not require a credit application, loan collateral, or other good faith requirements typically found in loans. The loan is taken out against the cash value of the policy, and the loan balance is deducted from the policy’s cash value if not repaid. The policyholder will owe interest on the loan, just as with a standard loan.

Automatic premium loan provisions help both the insurer and the policyholder: The insurer can continue to automatically collect periodic premiums rather than sending reminders to the policyholder, and the policyholder is able to maintain coverage even when they forget or are unable to send in a check to cover the policy premium.

The policyholder may still choose to pay the premium by the regularly scheduled due date, but if the premium is not paid within a certain number of days after the grace period, such as 60 days, the outstanding premium amount is deducted from the policy’s cash value. This prevents the policy from lapsing. If the automatic premium loan provision is used, the insurer will inform the policyholder of the transaction.

What Is an American Express Card?

An American Express card, also known as an “Amex” card, is an electronic payment card branded by the publicly traded financial services company American Express (AXP). The company issues and processes prepaid, charge, and credit cards. American Express cards are available to individuals, small businesses, and corporate consumers across the United States and around the world.

Understanding American Express Cards

American Express cards are issued by American Express and processed on the American Express network. American Express is one of only a few financial service companies in the industry that has the capability to both issue and process electronic payment cards.

American Express is a publicly traded company in the financial services industry. It offers both credit lending and network processing services, giving it a broad range of competitors in the industry. As with traditional lenders, it has the capability to issue credit products, which it provides in the form of charge cards and credit cards.

American Express has its own processing network that competes with Mastercard (MA) and Visa (V). Its most comparable competitor is Discover Financial Services (DFS), which is also a publicly traded financial service company offering both credit lending and a processing service network. With multiproduct capabilities, American Express generates revenue from both interest-earning products and network processing transaction services.

American Express Fees

American Express generates a significant portion of its revenue from transaction processing. Many merchants accept American Express cards and are willing to pay the transaction fees associated with processing because of the advantages that come with offering American Express as a payment option to customers.

In an American Express transaction, the merchant’s acquiring bank communicates with American Express as both the processor and the issuing bank in the transaction process. Merchant acquiring banks must work with the American Express processing network to transmit communications in American Express transactions. American Express is also the issuer that authenticates and approves the transaction. 

Merchants pay a small fee to American Express for its processing network services, which are part of the comprehensive fees involved with a single transaction. As both a processor and high-quality lender, American Express has built a strong reputation in the financial services industry.

Types of American Express Cards

As noted above, American Express credit cards and prepaid debit cards are offered to a variety of both retail and commercial customers. It is also an industry-leading provider of charge cards, which offer month-to-month credit with card balances that must be paid off each month.

American Express charge and credit cards follow standard underwriting procedures. The company seeks good- to high-credit quality borrowers—which means a credit score of at least 670—and generally is not a subprime lender.

American Express credit and charge cards come with a variety of benefits in the form of rewards points and travel perks, which depend, in part, on the annual fee charged. American Express cards may offer cash back on certain purchases, though they aren’t among the best cash back cards currently available. American Express also offers numerous branded prepaid debit cards, which can be used as gift cards or special-purpose reloadable payment cards.

Annual fees for American Express cards tend to run high: $95 for the Blue Cash Preferred Card, $99 for the Delta SkyMiles Gold American Express Card, $150 for the Green Card, $250 for the Gold Card, and $550 for the Platinum Card. That said, the Green, Gold, and Platinum cards have no predetermined spending limits. American Express does offer at least six cards with no annual fee. Customer service for all Amex cards is highly rated, with the company coming in No. 1 on J.D. Power’s 2020 U.S. Credit Card Satisfaction Study.

Partnerships, co-branded cards

American Express issues many of its cards directly to consumers, but it also has partnerships with other financial institutions. In the U.S., for example, Wells Fargo issued an American Express card (new applications were paused in April 2021, although this doesn’t affect current cardholders), and in Mexico, Banco Santander offers American Express cards. American Express also has partnerships with other companies to encourage consumers to apply for its credit cards. Two examples are its co-branded cards with Delta Air Lines, which allow consumers to earn frequent flier miles redeemable on Delta, and its Hilton Hotels co-branded cards.

Pros and Cons of an American Express Card