The Small Business Debtor

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Several provisions in the Bankruptcy Code are designed to afford small businesses a faster, more efficient and less expensive mechanism for reorganizing their businesses by eliminating the requirement for the appointment of a creditors' committee and simplifying the disclosure statement and plan confirmation process.

The Small Business Debtor

A small business debtor is defined by the Bankruptcy Code as a person engaged in commercial or business activities, not including a person that primarily owns or operates real property, that has aggregate noncontingent liquidated secured and unsecured debts that do not exceed $2,000,000. If a debtor qualifies and elects to be considered a small business under the Bankruptcy Code, the case is put on a "fast track" and treated differently than a regular Chapter 11 case under the Code.

Creditor Committee and Approval of Disclosure Statement

In a small business case the appointment of a creditors' committee and a separate hearing to approve the disclosure statement are not mandatory. The approval of the disclosure statement may be combined with the plan confirmation hearing. Also a small business case proceeds faster than a regular Chapter 11 case because the court may conditionally approve a disclosure statement, subject to final approval after notice and a hearing and solicitation of votes for acceptance or rejection of the plan. Thereafter, the disclosure statement hearing may be combined with the confirmation hearing. In addition, the debtor has a shortened period of time within which only the debtor may file a plan. After the 100-day period expires, any party in interest may file a plan; however, all plans must be filed within 160 days from the date of the order for relief.

The bankruptcy court may reduce or increase the 100-day and 160-day periods upon cause shown by any party. Small business debtors may solicit votes on a plan based on a disclosure statement that is conditionally approved by the bankruptcy court, so long as the debtor provides adequate information to each holder of a claim or interest that is solicited.

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