Downloadable Chapter 11 Timeline for a Pre-Packaged, Small Business Case

Chapter 11 small business bankruptcy cases can be submitted on a “pre-packaged” basis, which means the initial bankruptcy petition filed with the court is accompanied by the Plan of Reorganization AND sufficient ballots from the creditors accepting the Plan.  Typically, the Plan of Reorganization is filed 180 days after the petition and ballots are collected a few weeks after that.  A pre-packaged submission significantly speeds up the case processing and reduces legal expenses.

Instructions:

  • Click anywhere on the image above, then print off the timeline.
  • A numbered reference ( ) appears at the end of many of the captions on the timeline. The reference numbers correspond to the Notes below.

Notes:
(1) The Fair Debt Collection Practices Act…

prohibits debt collectors from contacting your business once you (or your attorney) notify them (by phone, mail, email, or meeting) that a bankruptcy attorney now represents your business. You must also give the attorney’s name and complete contact information to the debt collectors. Debt collectors may only contact your attorney and there are fines imposed for each contact violating the law. The Act does NOT prevent debt collectors or creditors from continuing efforts to collect the debt; nor does it pause a pending lawsuit or prevent creditors from bringing a new suit against your business. However, as a practical matter, once it is known your business is pursuing bankruptcy most collection efforts will stop anticipating the bankruptcy court’s issue of the Automatic Stay.

(2) 90-Day (theoretically) Plan Development, Negotiation, and Solicitation Period:

  • The business drafts the Plan of Reorganization, while
  • The attorney negotiates (and re-negotiates) settlements with creditors, which results in
  • On-going revisions to the Plan until there is sufficient creditor acceptance to enable the court to confirm the Plan when submitted.
  • Two-thirds of the Equity Interest Holders (business owners) must vote in favor of the Plan.
  • The business completes the bankruptcy Petition, Plan of Reorganization, and Disclosure Statement forms. The attorney will advise which of the Exhibits, Schedules, and supporting documents that usually accompany these filings are necessary, and
  • The attorney solicits the unsecured, impaired creditors (those who will get less than full repayment of the debt owed to them) for ballots voting in favor of the Plan.

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(3) Chapter 11 Pre-Packaged Small Business Case Petition is filed with the bankruptcy court:

The filing package consists of the forms and documents typically submitted for a Chapter 11 Small Business Case filing which includes the following:

  • Voluntary Petition for Non-Individuals Filing for Bankruptcy (Official Form 201),
  • Creditor/Mailing Matrix – A list of names and addresses of all the debtor’s creditors, formatted as a mailing list according to instructions from the bankruptcy court in which the debtor files, and
  • List of Creditors Who Have the 20 Largest Unsecured Claims Against Debtor and Are Not Insiders (Official Form 204) along with payment of…
  • Filing Fee $1,167 and
  • Administrative Fee $571.

In addition, this initial filing will also include:

  • Disclosure Statement (Form 425B),
  • Plan of Reorganization (Form 425A),
  • Creditor Ballots evidencing sufficient acceptance of the Plan from the impaired creditor classes meeting the thresholds necessary for the court to confirm the Plan

Also, there are 14 additional Schedules and supporting documents required for filing an ordinary Small Business Case. The District Court serving your area may not require all of these for a Pre-Packaged case.

Your bankruptcy attorney will advise which of them need to be included in the filing package. Your bankruptcy attorney will also file several “1st Day Motions. One of these will be a motion for an expedited processing of the pre-packaged case.

In most types of bankruptcies, the debtor must relinquish control of all property/assets to a court appointed trustee. Chapter 11 cases are the exception. The business retains control over itself, its property/assets, and becomes a “Debtor-In-Possession” upon filing the bankruptcy petition (unless the court believes the representatives of the business may have committed fraud, misconduct, or are grossly incompetent). However, as a Debtor-In-Possession (DIP), the business is now a fiduciary with all the powers and duties of a trustee that must preserve and protect the property of the business and must conduct the business in the best interests of its creditors. The U.S. Trustee oversees the case and closely monitors the activity, conduct and operations of the business to make sure the representatives faithfully perform its fiduciary duties.

(4) 1st Day Hearing:

The court will hold a 1st Day Hearing within 24 to 48 hours of its receipt of the filing package. The court will issue an “Automatic Stay.”. The Automatic Stay immediately suspends all “non-priority debt” collection efforts, foreclosures, evictions, repossessions, and pending and contemplated lawsuits, until the bankruptcy is granted, converted, or dismissed by the court.

At this meeting, the court will consider all 1st Day Motions filed by your attorney, including the motion for expediting the case.

Once your business files its bankruptcy petition, the business may no longer incur expenses of any kind, pay bills, or use credit without prior permission from the court. The bankruptcy attorney will file “1st-Day Motions” with the bankruptcy petition, asking the court’s blanket approval allowing the business to conduct all financial transactions and operations that are necessary in the ordinary course of running the business. The attorney will also include a motion asking the court to approve “Debtor-In-Possession” borrowing – known as a “DIP Loan” – that will enable the business to borrow cash needed to pay expenses necessary to keep operating during the progress of the bankruptcy case. These motions will be reviewed and ordered during the 1st Day Hearing.

The court will set the deadline for creditors to file any objections at 28 days from the date of the petition. Also, the court will set the date for the combined Disclosure Statement and Plan Confirmation Hearing 35 days from the petition filing date.

(5) Initial Debtor’s Interview with the U.S. Trustee:

Within the first two weeks (usually sooner), the business’s representatives must meet with the U.S. Trustee. The U.S. Trustee will review all filed documents, determine that the business will be able to present a viable Plan of Reorganization, explain the steps in the processing of the case and what the court expects – information and conduct – from the business and its representatives, the role of the court and the U.S. Trustee, and answer any related questions. The U.S. Trustee is not permitted to provide any legal advice.

(6) Monthly Reports:

The business must file a Monthly Report (Form 425C) by the 21st day following the close of the month being reported on. Monthly reports are due each month following the filing of the Petition, continuing until Plan confirmation.

(7) Confirmation Hearing:

The court will consider and resolve objections to the Plan, and the votes of the impaired creditors and equity interest holders to accept or reject the Plan will be entered.

(8) Plan Confirmation Stay/Plan Effective Date:

Assuming sufficient impaired creditor acceptance of the Plan, and all objections have been resolved or dismissed, the court will either issue an Order of Confirmation effective immediately or impose a Confirmation Stay of not more than 14 days following the combined Disclosure Statement and Confirmation Hearing. The Plan becomes effective at the expiry of the Stay. The court will verify that all the Code requirements for confirmation have been met. Among other requirements, this includes verification that the following debts have been paid in full or will be paid in full pending receipt of committed Exit Loan proceeds:

  • DIP Loans
  • All delinquent payments for “reaffirmed” secured debts
  • All delinquent payments for “accepted” leases and service contracts
  • All administrative expenses and fees

(9) Quarterly Fees:

The Code requires the payment of quarterly fees for the services provided by the U.S. Trustee. The fee is based on the total dollar amount of disbursements made by the business during the calendar quarter. It is payable at the end of each calendar quarter during the period starting with the Petition Date and ending with the order of the Final Decree. The minimum quarterly fee is $250. If total disbursements during the quarter exceed $62,624, the fee is 0.4% (.004) of the total quarterly disbursement. The Chapter 11 Quarterly Fee Statement must also be filed along with payment of the fees.

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