11 U.S.C. Section 1187 - Duties and Reporting Requirements

What Is Section 1187?

Section 1187 imposes additional duties on a Subchapter V debtor that supplement the general debtor duties of Section 521 and the Chapter 11 small-business duties of Section 1116. The Subchapter V regime is designed to move quickly, with a 90-day plan-filing deadline and an early status conference, and Section 1187 ensures that the trustee, the United States Trustee, and creditors have the information needed to evaluate the debtor's reorganization prospects in real time.

Initial Filings: Section 1187(a)

Section 1187(a) requires a Subchapter V debtor to comply with the small-business filing requirements of Section 1116(1)(A) or (B), which means filing with the petition (or shortly thereafter) the most recent balance sheet, statement of operations, cash-flow statement, and federal tax return. If those documents do not exist, the debtor must file a statement under penalty of perjury explaining their absence.

This pre-petition documentation requirement is more demanding than the standard Section 521(a) filings. It is intended to give the trustee and the United States Trustee an immediate picture of the debtor's financial position, accelerating the evaluation of whether reorganization is feasible.

Continuing Duties: Section 1187(b)

Section 1187(b) makes the small-business duties of Sections 308 and 1116(2)-(7) applicable to Subchapter V debtors. These include:

• Periodic financial and other reports to the court, the United States Trustee, and parties in interest under Section 308.
• Attendance, by senior management and counsel, at meetings scheduled by the court or the United States Trustee.
• Timely filing of schedules and the statement of financial affairs.
• Maintenance of insurance customary and appropriate to the industry.
• Timely filing of tax returns and other governmental filings, and timely payment of post-petition tax liabilities.
• Allowance of the trustee or United States Trustee to inspect the debtor's business premises, books, and records at reasonable times.

Failure to perform these duties is grounds for conversion or dismissal under Section 1112(b) and may be grounds for removal of the debtor in possession under Section 1185.

Post-Confirmation Reporting

In nonconsensual cases confirmed under Section 1191(b), the debtor's reporting obligations continue throughout the plan period (3 to 5 years). The Subchapter V trustee uses this information to monitor performance, to make plan payments to creditors under Section 1183(b)(6), and to assess whether modification or other corrective action is needed.

In consensual cases confirmed under Section 1191(a), post-confirmation reporting is typically less extensive because the trustee's service terminates upon substantial consummation under Section 1183(c)(2). Even so, the United States Trustee's quarterly-fee reporting requirements under 28 U.S.C. Section 1930(a)(6) may continue until the case is closed.

Tax Returns and Periodic Reports: Section 1187(c)

Section 1187(c) cross-references the periodic-reporting requirements of Section 308 and the tax-return filing requirement of Section 1116(6). Monthly operating reports remain the principal mechanism by which the trustee and creditors monitor the debtor's operations. The Federal Rules of Bankruptcy Procedure prescribe the form and frequency of these reports, with district-specific local rules sometimes imposing additional requirements.

Failure to timely file operating reports or to pay post-petition taxes is a frequent basis for motions to convert or dismiss under Section 1112(b). United States Trustee program offices monitor compliance and routinely file dismissal motions where reporting falls behind by more than one or two months.

Related Bankruptcy Code Sections

This section operates in concert with several other provisions of the Bankruptcy Code:

• Section 521 - General debtor duties
• Section 1183 - Subchapter V trustee duties
• Section 1184 - Debtor rights and powers
• Section 1185 - Removal for failure to perform duties
• Section 1188 - Status conference and report
• Section 1112 - Conversion or dismissal for reporting failures

Understanding how these sections interact is important for debtors, creditors, trustees, and counsel navigating a bankruptcy case.