Small Business Cases

Chapter 11
Small Business

Chapter 11 for small businessA small business case is a chapter 11 proceeding filed by a person engages in business activities other than owning or operating real property that has liquidated debts as of the filing date of not more than $2,490,925 as of February of 2015 and in which the United States Trustee has not appointed a committee of unsecured creditors or where the court has determined that such a committee has not been sufficiently active.

In such cases the trustee or debtor in possession must file the following within 7 days: a most recent balance sheet, statement of operations, a cash flow statement, and a tax return. Its senior management must then attend the meeting of creditors; timely file all schedules unless the time is extended. The extension cannot exceed 30 days. In addition, the debtor in possession must file all required financial reports, maintain appropriate insurance, timely file all post-position tax returns with remits and allow inspections by the United States Trustee. Only the debtor may file a plan within 180 days of the petition filing date. In a small business case the court may determine that the plan itself provides adequate information. If such is intended, the plan as proposed must so state.

Prior to the BAPCPA amendment to the bankruptcy code in 2005, a chapter 11 debtor elected whether to proceed as a small business and incur the burdens and benefits associated with such an election. BAPCPA eliminated any “election” by the debtor by amending former § 101(51 C) and defining a “small business case” as “a case filed under chapter 11 of this title in which the debtor is a small business debtor.” If a debtor satisfies the requirements of § 101(51D), its bankruptcy case is a small business case and the BAPCPA-amended Code’s small business timing provisions and deadlines are applicable.

Every chapter 11 debtor is faced with a plethora of deadlines. Those for a small business debtor vary from those for other chapter 11 debtors.

For example, under § 1121(e), a small business debtor is the only entity that may file a plan in the first 180 days of the case (unless that period of exclusivity is extended or the court orders otherwise). See § 1121(e)(1). This is a longer period of exclusivity than the 120 days a non-small business debtor enjoys. See § 1121(c)(2). But the statute gives the small business debtor burdens as well. The small business debtor has an outside bar of 300 days from the petition date within which it must file a disclosure statement and plan. § 1121(e)(2). There is no similar Code-imposed bar for non-small business debtors.

[12] Additionally, the code provides a plainly worded express deadline requiring that the plan be confirmed within 45 days after it is filed unless this time period is extended by motion filed before the time period expires. It is for this reason that many small business debtors seek to use the plan to satisfy the disclosure requirement by asking the court to waive the need for a disclosure statement. If this path is not chosen and the debtor chose instead to follow the “traditional” disclosure statement approach, the debtor must file a § 1121(e)(3) motion, to be heard on notice, and establish grounds for a timely-entered order extending the 45-day confirmation deadline to allow for the additional time needed for the filing of the disclosure statement. Section 1129(e) expressly provides that § 1121(e)(3) controls the granting of any extension of the 45-day period within which confirmation must occur. That section provides that In a small business case the time periods specified within which the plan shall be confirmed, may be extended 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; and the order extending time is signed before the existing deadline has expired.


Call Attorney C. Stephen Gurdin Jr. at his Gurdin Law Wilkes-Barre Scranton Pennsylvania area office today, 570.826.0481.