Small Business Case
Chapter 11 Small Business bankruptcy proceedings are treated differently than other Chapter 11 Bankruptcy cases.
Small Business Case
Under 11 U.S.C. § 101(51C), the small bankruptcy business claim is identified as a case which has a "small business debtor". How does a filer know if they have small business debts?
The United States Bankruptcy Code outlines a 2 part test:
- Is the business debtor involved in business or commercial activities (with the exception of primarily owning and operating real property) with liquidated, non-contingent unsecured and secured debts of $2,190,000 or less?
Has the U.S. Trustee appointed a creditors' committee, and if they have not, has the United States Trustee decided the creditors' committee is unable to sufficiently oversee the debtor (11 U.S.C. § 101(51D))?
To prepare the Chapter 11 Bankruptcy small business case the debtor in possession must provide: the most recent prepared balance sheet, cash-flow statements, a statement of operations and the most recently filed United States tax return. All documents must be attached to the Chapter 11 Bankruptcy petition. If the documents are not provided a statement for the reason of their absence must be provided. Under 11 U.S.C. §§ 308, 116, the Chapter 11 Bankruptcy small business debtor must also provide documentation to the bankruptcy court outlining their projected cash receipts and disbursements and their profitability analysis. The debtor must also provide reports about their tax status and whether or not all of the business tax returns have been filed.
The United States Trustee provides additional oversight for a small business Chapter 11 Bankruptcy including: 1) evaluating the debtor's viability; 2) reviewing the debtor's business reorganization plan; 3) outlining and explaining the requirements for filing the debtor's bankruptcy reports and 4) monitoring the debtor's business activities throughout the duration of the bankruptcy case.
Small business bankruptcy claims generally can be resolved more quickly than large business bankruptcy claims. Small business debtors can create and file their Chapter 11 Bankruptcy reorganization plan during the first 180 days. This is considered an "exclusivity period" and although it can be extended up to 300 days, it can not be extended as long as other business cases which can be lengthened up to 180 if the bankruptcy court determines there is cause.
More Help on Small Business Case
- Chapter 11 Bankruptcy - Unlike Chapter 7 Bankruptcy which liquidates the debtors non-exempt assets, Chapter 11 Bankruptcy allows the Debtor (which is generally a corporation or partnership) to restructure their debt obligations and continue to operate their business (although the business is supervised by the bankruptcy court and should be managed and operated for the benefit of the creditors). - read more
- Creditors Committee - A Creditors\' Committee, appointed by the U.S. Trustee, represents the interest of unsecured creditors, bondholders, retirees or security holders in a Chapter 11 Bankruptcy reorganization (some small business cases do not require the U.S. trustee to appoint the committee). - read more
- Liquidation - Chapter 7 Bankruptcy is known as a \"liquidation\" bankruptcy and creditors will be paid from the liquidation of the debtor\'s assets. - read more