Chapter 11 for Individuals and Small Businesses. A Primer on Small Chapter 11 Cases

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1 Chapter 11 for Individuals and Small Businesses A Primer on Small Chapter 11 Cases

2 Chapter 13 v. Chapter 11 Debt limitations and eligibility under 11 U.S.C. 109(e) Individuals and Companies Semi-superdischarge vs. superdischarge 727 Objections to Discharge Cost (Filing fees, UST fees, Ch. 13 fees) Plan term limits Voting

3 Obligations of a Chapter 11 Debtor Open and maintain a DIP account at an approved financial institution while the Chapter 11 case is pending Attend a Debtor interview File monthly operating reports Maintain insurance on estate property Quarterly payments to the United States Trustee Payment of post-petition obligations as they come due, e.g. payroll taxes, property taxes, wages, etc. Preservation of estate assets

4 First Day Motions Cash Collateral Pre-petition Wages Utilities Employment of Debtor s Counsel and accountant

5 Exclusivity Only the Debtor may file a Plan during the first 120 days after the entry of an Order for Relief Extension for Cause up to 18 months Ability of parties in interest to file and propose a Plan of Reorganization

6 Disclosure Statement What is it? Why do you need it? Contents and adequate information History of the Debtor Reasons for the bankruptcy filing Claim treatment and classification Liquidation Analysis Management of the Reorganized Debtor Financial Projections Tax Consequences

7 Voting and Solicitation When can a Debtor solicit votes? Impaired vs. unimpaired claims How many votes are required to carry a class? 2/3 in dollar amount AND A majority in number of claims or interests of that class which actually cast ballots for acceptance or rejection of the Plan

8 The Plan and Confirmation Requirements under 1129(a) The Plan complies with the applicable provisions of the Bankruptcy Code The Debtor has complied with the applicable provisions of the Bankruptcy Code The Plan has been proposed in good faith Disclosure of promises or payments for services or expenses in connection with the bankruptcy case issued by the Debtor, person issuing securities or acquiring property under the Plan Disclosure of identity and affiliations of any individual proposing to serve as an officer, director or voting trustee of the reorganized Debtor Disclosure of the identity of any insiders that will be employed or retained by the reorganized Debtor and the anticipated compensation

9 Confirmation under 1129(a) cont d Compliance and approval of any governmental regulatory commissions Best interest of creditors With respect to each class of claims or interests Such class has accepted the Plan; or Such class is not impaired under the Plan Treatment and acceptance of priority claims under section 507 Voting and acceptance by at least one class of impaired creditors without counting the votes of insider Feasibility and the likelihood that the Debtor will not need as subsequent reorganization Payment of fees to the U.S. Trustee

10 Confirmation under 1129(a) cont d Continued payment of retiree benefits Individual Debtor must be current on postpetition domestic support obligations Dedication of individual Debtor s disposable income for 5 years All transfers of property must be made in accordance with applicable nonbankruptcy law

11 Cramdown and 1129(b) What happens when all the requirements of section 1129(a) have been met except that one (or more classes is impaired and has voted to reject)? The Plan may still be confirmed without the consent of each class? Does the Plan discriminate unfairly? Is the Plan fair and equitable?

12 Absolute Priority Rule Requires that if the holders of claims or interests in a particular class receive less than full value for their claims or interests, no holders of claims or equity interest in a junior class may receive property under the Plan on account of their junior interest. See 203 North LaSalle St. P ship., 526 U.S. at , 119 S.Ct. 1411

13 The Small Business Debtor and the Single Asset Real Estate Case Designation Small Business Debtor additional filing requirements Small Business Debtor Benefits Exclusivity Provisional approval of disclosure statement Small Business Debtor Pitfalls Deadlines for confirmation Single Asset Real Estate Requirements

14 Post Confirmation and Case Closing Fee Applications of Professionals Claims Objections Quarterly Operating Reports Application for Final Decree v. Application to Close Case without a Discharge