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Bankruptcy and the Small Business Debtor

Several provisions of the Bankruptcy Code are designed to afford small business debtors an accelerated, more efficient, and less expensive mechanism for reorganizing their businesses by eliminating the requirement for the appointment of a creditors' committee and simplifying the disclosure statement and plan confirmation process. See generally 11 U.S.C.S. §§ 308, 1116 & 1121(e).
 
Small Business Debtor
 
11 USCS § 101(51D) defines a small business debtor as follows:
 
The term "small business debtor"--
      (A) subject to subparagraph (B), means a person engaged in commercial or business activities (including any affiliate of such person that is also a debtor under this title and excluding a person whose primary activity is the business of owning or operating real property or activities incidental thereto) that has aggregate noncontingent liquidated secured and unsecured debts as of the date of the petition or the date of the order for relief in an amount not more than $ 2,190,000 (excluding debts owed to 1 or more affiliates or insiders) for a case in which the United States trustee has not appointed under section 1102(a)(1) [11 USCS § 1102(a)(1)] a committee of unsecured creditors or where the court has determined that the committee of unsecured creditors is not sufficiently active and representative to provide effective oversight of the debtor; and
      (B) does not include any member of a group of affiliated debtors that has aggregate noncontingent liquidated secured and unsecured debts in an amount greater than $ 2,190,000 (excluding debt owed to 1 or more affiliates or insiders).
 
If a debtor qualifies and elects to be considered a small business under the Bankruptcy Code, the case is put on a "fast track" and treated differently than a regular Chapter 11 case under the Code.
 
Creditor Committee and Approval of Disclosure Statement
 
In a small business case the appointment of a creditors' committee and a separate hearing to approve the disclosure statement are not mandatory. The approval of the disclosure statement may be combined with the plan confirmation hearing. A small business case also proceeds faster than a regular Chapter 11 case because the court may conditionally approve a disclosure statement, subject to final approval after notice and a hearing and solicitation of votes for acceptance or rejection of the plan. Thereafter, the disclosure statement hearing may be combined with the confirmation hearing. In addition, the debtor has a shortened period of time within which only the debtor may file a plan. After the 100-day period expires, any party in interest may file a plan; however, all plans must be filed within 160 days from the date of the order for relief.
 
The bankruptcy court may reduce or increase the 100-day and 160-day periods upon cause shown by any party. Small business debtors may solicit votes on a plan based on a disclosure statement that is conditionally approved by the bankruptcy court, so long as the debtor provides adequate information to each holder of a claim or interest that is solicited.