Chapter 11 Small Business Cases

Rev. 1/15/2019

 

Fed. R. Bankr. P. 1020

 

 

A small business case is defined as a case with a "small business debtor." 11 U.S.C. § 101(51C).  Determination of whether a debtor is a "small business debtor" requires application of a two-part test.

 

First, the debtor must be engaged in commercial or business activities (other than primarily owning or operating real property) with total non-contingent liquidated secured and unsecured debts of $2,323,300.00 or less.

 

Second, the debtor's case must be one in which the U.S. trustee has not appointed a creditors' committee, or the court has determined the creditors' committee is insufficiently active and representative to provide oversight of the debtor. 11 U.S.C. § 101(51D).

 

 

 

Election as a Small Business Debtor

 

  • For cases filed on 10/17/2005 and after, the debtor must identify themselves as "small business" on the voluntary petition.   
     

  • In an involuntary chapter 11 case, should the debtor elect to be a small business debtor, the debtor must file a statement (Debtor's Election of Small Business Designation) within 14 days after entry of the order for relief. See Fed. R. Bankr. P. 1020(a)  
     

  • Objection to Small Business Debtor Designation – the US Trustee or a party in interest may file an objection to the debtor’s statement within 30 days after the conclusion of the meeting of creditors, or within 30 days after any amendment to the statement, whichever is later. See Fed. R. Bankr. P. 1020(b)
     

  • If there is an unsecured creditors committee (appointed under 11 U.S.C. § 1102(a)(1)), the case proceeds as a small business case only if, (and from the time when) the court enters an order determining that the committee has not been sufficiently active and representative to provide effective oversight of the debtor and the debtor meets all other requirements for being a small business.   The US Trustee or a party in interest may file a Request for Determination within a reasonable time after failure of the committee to be sufficiently active.  The Debtor may file a Request for Determination at any time. See Fed. R. Bankr. P. 1020(c)
     

  • Objections or Requests for Determinations under Fed. R. Bankr. P. 1020, are governed under Fed. R. Bankr. P. 9014 and must be served on the:

 

    • debtor

    • debtor’s attorney

    • the US Trustee

    • case trustee (if applicable),

    • any committee appointed under 11 U.S.C. § 1102 or its authorized agent, or, if no committee of unsecured creditors, the creditors included on the 20 largest unsecured creditors list;

    • any other entity as the court directs.
       
       

  • The debtor in possession or a trustee must append to the voluntary petition [or, in an involuntary case, file not later than 7 days after entry of the order for relief]  the most recent: See 11 U.S.C. § 1116 (1)

 

    • balance sheet;

    • statement of operations,

    • cash-flow statement

    • Federal tax return; or

    • a statement (under penalty of perjury) that no balance sheet, statement of operations or cash-flow statement has been prepared and no Federal tax return has been filed.

     

  • The Court may grant, after notice and hearing, an extension of time to file all schedules and statement of financial affairs, but may not extend the deadline later than 30 days from the date of the order for relief (absent extraordinary and compelling circumstances). See 11 U.S.C. § 1116(3)
     
  • Small business debtors must file periodic financial and other reports containing specific information, including the information listed in paragraphs (1) through (4) of 11. U.S.C. § 308(b).  
     


Plan and Disclosure Statement


 

  • Only the debtor may file a plan during the first 180 days of a small business case. The Court may extend the "exclusivity period" no more than 300 days after the date of the order for relief AND only if:

 

    • the debtor, after providing notice to parties in interest, demonstrates by a preponderance of the evidence that it is more likely than not that the court will confirm a plan within a reasonable period of time;

 

    • a new deadline is imposed at the time the extension is granted;

 

    • the order extending the deadline is signed before the existing deadline expires.   See 11 U.S.C. § 1121(e).  

  • If the Court determines the plan contains adequate information, the Court may not require a separate Disclosure Statement.  See 11 U.S.C. 1125(f)(1)

 


Disclosure Statement Hearing and Plan Confirmation


 

  • The court may, upon application of the plan proponent or on its own initiative, conditionally approve a disclosure statement and combine the hearing on approval of disclosure with the hearing on confirmation of the plan.
     

  • The Court must confirm a plan within 45 days of filing of the plan unless the Court extends the time period in accordance with 11 U.S.C. § 1129(e).    The Court may grant an extension only on motion and notice of the debtor.  

 

  • Acceptance of Plan may be based upon a conditionally approved Disclosure Statement if mailed to claimants not later than 25 days prior to the confirmation hearing.

 

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