The Bankruptcy Code gives a small business debtor a streamlined process for Chapter 11 bankruptcy cases. Find out if this fast track option may work to help your business reorganize its debts.
Defining the Small Business Debtor
Bankruptcy law defines the small business debtor for Chapter 11 cases as:
- A person engaged in commercial or business activities
- The business isn't based mainly on real estate ownership and operation
- Generally debts don't exceed $2,190,000
If you qualify, you are treated as a small business debtor, and your case is put on the fast track.
Creditor Committees, Disclosure Statement and Timelines
The small business debtor case combines steps compared with the usual Chapter 11 case, and reduces the time allowed for various stages in a case. The result is to save money and time. Streamlining includes:
- Disclosure statements may not be required - the filer's reorganization plan may provide all needed information
- Appointment of a creditors' committee and a separate hearing to approve the filer's disclosure statement aren't required
- The court can provide conditional approval for the disclosure statement, with final approval subject to notice and a hearing, and solicitation of votes on the plan
- The hearing on the disclosure statement can be combined with the plan confirmation hearing
- A shortened period is allowed for the debtor to file a reorganization plan - 180 days. After it expires, any party in interest can file a plan, with all plans filed within 300 days of the court's order for relief in the case
- The court has power to reduce or increase the 180-day and 300-day time limits if a party shows cause to do so
Working with the US Trustee and the Court
A small business debtor case receives more oversight from the court and the US Trustee compared to a regular Chapter 11 case. The debtor must attach various financial statements and documents to its bankruptcy petition. The debtor's senior management and attorney must go to court and the US Trustee meeting.
As the case progresses, the small business debtor must make filings reporting on the business's finances, operations and compliance with bankruptcy law. Closer management of these cases goes toward giving the small business the best chance of success for its reorganization plan.