B737-700 CREW FORGOT TO SET TKOF FLAPS IN RESPONSE TO THE TKOF CHKLIST AT MDW.

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ORIGINATING FLT. I HAD DONE MY COCKPIT PREFLT CHKS AND WAS LOOKING FOR THE OPS AGENT TO GIVE HIM AN MEL NUMBER THAT I HAVE JUST GOTTEN FROM DISPATCH. THE FLT WAS BOARDED SO I JUMPED IN THE SEAT AND WE PUSHED BACK AND STARTED THE ENGS. WHEN I SET THE BRAKES AND CLRED THE GND PERSONNEL OFF; THE FO INFORMED ME THAT WE HAD NOT READ THE CHKLIST. WE STARTED AT THE ORIGINATING FLT CHKLIST AND READ THROUGH TO THE BEFORE TKOF CHKLIST. SOMEWHERE DURING ALL OF THIS; THE FO SAID HE FELT HE SHOULD TELL ME THAT HE SAW A SUSPICIOUS 'IRANIAN-LOOKING' PAX THAT WAS PLAYING WITH THE FLT ATTENDANT'S SEAT BELTS. I SUPPOSE AT THIS TIME BOTH OF OUR MINDS WERE SOMEWHERE ELSE AND NOT ON WHAT WE SHOULD BE DOING BECAUSE THE FLAPS WERE NEVER PLACED TO POS 5 DEGS. WE TAXI OUT TO RWY 31C AND WERE CLRED INTO POS AND HOLD. AFTER I SET THE BRAKES; I WENT THROUGH MY MENTAL CHKLIST AND REALIZED THAT THE FLAPS WERE STILL UP. I CALLED FOR THE FO TO PUT THE FLAPS TO POS 5 DEGS. I WAS GOING TO EXIT THE RWY; BUT THE FLAPS MOVED QUICKLY TO POS 5 DEGS AND WE WERE CLRED FOR TKOF. I KEPT THE BRAKES SET UNTIL 'U' HAD DONE A THOROUGH COCKPIT SCAN TO MAKE SURE WE HADN'T SCREWED ANYTHING ELSE UP. WE TOOK OFF WITHOUT FURTHER INCIDENT. THIS OCCURRENCE WAS MY FAULT BECAUSE I LET SEVERAL DISTRACTIONS GET IN MY WAY OF DOING MY PRIMARY JOB OF PROPERLY RUNNING THE CHKLIST.