Did you know that commercial bankruptcy filings during the first nine months of 2016 increased 28 percent compared to the same period in 2015? From January 1, 2016 through September 30, 2016, 28,789 commercial bankruptcies were filed in the United States. This number represents a 28 percent increase over the 22,444 commercial bankruptcies filed during the same period in 2015, according to data compiled by Epiq Systems, Inc. Of the total commercial bankruptcies filed thus far in 2016, 4,311, or about 15 percent, were chapter 11 filings.
The substantial increase in filings means that you and your business are increasingly likely to be affected by a bankruptcy proceeding. If you receive a notice from a United States Bankruptcy Court that an entity you have had dealings with has filed a chapter 11 bankruptcy petition, you should be aware of the following timeline that governs chapter 11 proceedings:
| Petition Date | The chapter 11 bankruptcy petition is filed with supporting documentation. Absent a contrary court order, the debtor’s management will retain control of the business and exercise the powers of a “debtor in possession.” All creditors identified by the debtor will receive a “Notice of Bankruptcy” from the court. Once you have knowledge that a bankruptcy petition has been filed, you must cease all collection activities against the debtor. | |
| First Month | The debtor will seek court authorization for certain activities of the debtor in possession, such as the use of cash collateral or obtaining “DIP” financing. The debtor may also seek court authorization to “assume” favorable contracts and “reject” unfavorable contracts. | |
| Day 15 | The debtor must file all its supporting schedules and a Statement of Financial Affairs, unless the court has granted it an extension of time. | |
| Day 20 | The debtor must provide adequate assurance of payment of utility service to avoid termination of services. | |
| Day 21 to Day 40 | A meeting of creditors (also known as a “341 meeting”) is convened by the Office of the U.S. Trustee. Creditors may attend and ask questions of the debtor reasonably related to the assets, liabilities, operations, and prospects of the debtor. The date, time and location of the meeting of creditors are set forth in the Notice of Bankruptcy. | |
| Day 61 | The debtor must commence performance on commercial lease obligations, unless the court orders otherwise. | |
| Date Set by the Court | Creditors must file their proofs of claim by a date (known as the “bar date”) set by the court. The bar date is listed on the Notice of Bankruptcy. | |
| Day 90 | Last day for the debtor to remove pending state court litigation to the bankruptcy court. | |
| Day 120 | Last day for the debtor to have the “exclusive” right to propose a plan of reorganization or liquidation, unless the exclusivity period is extended by court order. Also the last day for the debtor to assume commercial property leases, unless the time period is extended by court order. | |
| Day 180 | Last day for the debtor to obtain acceptance of its plan, unless the debtor’s exclusivity period is extended by court order. | |
| Day 300 | Last day for a “small business debtor” to file a plan. |
Click here for a printable version of the timeline.
Other dates will be set by the bankruptcy court in connection with specific requests filed by the debtor or by interested parties. If you may be affected by the request, you will be given notice and a deadline will be set for you to respond to the request if you wish to be heard by the court.
Hirschler Fleischer can assist you in navigating a chapter 11 bankruptcy case. Whether you need to file a proof of claim, defend a preference action, submit a bid for the purchase of bankruptcy estate assets, or have some other involvement in a bankruptcy case, we are here to help.
Media Contact
Luis F. Ruiz
804.771.5637
lruiz@hirschlerlaw.com