By Judge Cathy Peek McEwen
United States Bankruptcy Judge Middle District of Florida
A subchapter V bankruptcy is designed to go fast to contain costs. In his written testimony to Congress on behalf of the National Bankruptcy Conference in support of the Small Business Reorganization Act of 2019, Bankruptcy Judge Tom Small (Ret.) affirmed that
“[a] subchapter V case will move fast and that alone will reduce costs.” So why aren’t debtors’ counsel approaching the case with as much up-front attention as possible in order to launch it on a fast path to success?
A subchapter V should be as pre-packaged as possible. Communication with major creditors should commence pre-petition with a view toward a consensual plan.
The initial debtor interview takes place within the first ten days after the case is filed.
And prior to the first status conference, the debtor must file and serve the report required by 11 U.S.C. § 1188(c), detailing the efforts that the debtor has undertaken and will
undertake to attain a consensual plan of reorganization. The order setting the status conference requires that the debtor’s report include:
a. Whether and to what extent the Debtor has communicated with the Subchapter V Trustee;
b. Whether and to what extent the Debtor has communicated with creditors; and
c. Whether the Debtor is aware of or anticipates any objections or impediments to consensual confirmation and describing the issues.
In other words, the roadmap for that fast path to success must be ready early on in the case. So, without the necessary advance preparation, the subchapter V cannot
possibly work in the way envisioned by Judge Small.
Why, then, in 60 percent of our Tampa Division subchapter V cases (as of July 8) are the schedules and statement of financial affairs not filed with the petition on day one? And why is it that of those same skeletal cases, 93 percent didn’t have schedules and the SOFA
filed until after the cases had been on the docket for more than ten days?
We have a talented bar. Perhaps some are falling asleep at the wheel, pre-petition, and artificially pressing the brakes?