Aurelius Robleto Speaks At 21st Annual Bankruptcy Institute

Bankruptcy for Small Business Debtors

Special Rules Apply to Debtors in Small Business Cases

On September 9, 2016, Aure Robleto participated with a panel of speakers at the 21st Annual Bankruptcy Institute in Pittsburgh.  The event is conducted annually by the Pennsylvania Bar Institute and consistently draws many of the top bankruptcy practitioners in Pittsburgh.  The session was entitled Smaller Chapter 11s and Closely-Held Businesses – (Commercial).  The topic evoked a spirited discussion of the merits and drawbacks the small business debtor designation.

small-business

As part of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act, the United States Bankruptcy Code, the concepts of a small business debtor and a small business case were introduced.  The designation of “small business debtor” carriers additional reporting requirements not present in a typical chapter 11 bankruptcy case.  In many jurisdictions, including the United States Bankruptcy Court for the Western District of Pennsylvania, a special form disclosure statement must be used that plainly sets out projected revenue and expenses and other important financial data.

Perhaps most critically, the period during which the debtor has an exclusive right to file a plan is slightly longer than that permitted to debtors in chapter 11 bankruptcy cases that are not small business cases.  However, in order to have that deadline extended, the debtors’ lawyers must meet very strict timing and pleading requirements.  The consequence for failing to meet the deadlines for the filing of a plan and disclosure statement or for confirming a chapter 11 plan are severe and often deprive the debtor of an opportunity to reorganize.

Bankruptcy is complex and small business cases can add a new layer of complexity.  Small business owners who want the best chance to keep their company operating should have a comprehensive discussion with an experienced bankruptcy lawyer.

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