Chapter 2 Preparation of the Petition, Schedules and Statements: What's Different?

• Jurisdiction: United States

Chapter 2: Preparation of the Petition, Schedules and Statements: What's Different?

As with most bankruptcy cases, the success of an individual chapter 11 bankruptcy case depends largely upon accurate documentation. Of critical importance are the petition, schedules and accompanying statements.

I. Preparation of the Petition: Don't Just "Check the Box"

There are seven parts to a voluntary chapter 11 petition. The discussion below addresses provisions of particular concern when representing an individual filing for chapter 11 bankruptcy.

A. Part 1: Name and Address of the Debtor

An often overlooked area of concern is the name and address of the debtor. Before filling out the petition, make sure to inquire about a debtor's aliases, business names or any employer identification numbers used in the preceding eight years. Bankruptcy practitioners should also research the appropriate district in which to file the case. While it may be appropriate to file the case in a particular district, the exemptions for which the debtor is eligible may differ if he or she lived in another state for certain periods of time preceding the petition date.

B. Part 2: Current and Prior Case(s)

Part 2 of the petition requires filers to indicate, among other things, whether there is a pending case of a spouse, business partner or an "affiliate."³⁹ Additionally, if the debtor rents his or her residence, was the subject of an eviction, and wants to stay in the rented residence after the bankruptcy, the debtor must complete Official Form 101A, "Initial Statement About an Eviction Judgment Against You." This form requires the debtor to identify the landlord and certify (1) whether the debtor has the right to stay in the premises by paying the entire delinquent amount, or (2) that the debtor deposited the amount of rent that would be due during the 30 days after the petition date.

C. Part 3: Can an Individual Be a Small Business Debtor?

Part 3 of the petition requires an individual chapter 11 debtor to indicate the name and location of any business he or she operates as a sole proprietor. Part 3 also requires the debtor to indicate whether he or she is a "small business debtor." Contrary to what you may believe, an individual chapter 11 debtor can be considered a "small business debtor." Moreover, the Bankruptcy Code defines "small business debtor" as "a person engaged in commercial or business activities..."⁴⁰ and further defines a "person" to include an individual.⁴¹

1. When Is an Individual a Small Business Debtor? The Two-Part Test

The determination of whether a debtor is a "small business debtor" requires the application of a two-part test. First, the debtor must be engaged in commercial or business activities (other than primarily owning or operating real property) with total noncontin-gent liquidated secured and unsecured debts of $2,566,050⁴² or less. Second, the debtor's case must be one in which (1) the U.S. Trustee has not appointed a creditors' committee or (2) the court has determined that the creditors' committee is insufficiently active and representative to provide oversight of the debtor.⁴³

2. What Additional Documents Are Required for Small Business Debtors?

If a debtor is a small business debtor, the most recent balance sheet, statement of operations, cash-flow statement and federal income tax return must accompany the petition. If any of these documents do not exist, the debtor must include a sworn statement that the documents do not exist and that no federal tax return has been filed.

D. Part 4: Does the Debtor Own or Possess Any Hazardous Property?

Part 4 of the petition requires the disclosure of any property that is hazardous or poses a threat of "imminent and identifiable hazard to public health or safety." The debtor must describe where the property is, what the hazard is, and why immediate attention is necessary.

E. Part 5: Credit Counseling

Unlike a corporate chapter 11 case, an individual filing a chapter 11 bankruptcy is...