Page 119 - Bankruptcy Volume 1

Distributions to Claimants

Plans generally provide for secured, administrative, and priority claims to be paid in full, either on the
effective date or as otherwise provided for in the plan. As such, distributions to holders of general unse-
cured claims may be lower than their claim amount, depending on the remaining value of the bankruptcy
estate. The amount and nature of such distributions are made in accordance with the provisions in the
plan (as explained in the disclosure statement). The reorganized debtor may make distributions, or a
trustee or other fiduciary may be designated to do so. Assets designated for distribution to holders of
general unsecured claims are generally distributed on a pro rata basis.

Reserves are established to provide for payments to those claimants whose claims are still contingent,
unliquidated or disputed (and therefore not yet resolved). In order to ensure that reserves are adequate
for payment of unresolved claims to the extent they become allowed, the debtor may file a motion with
the court to establish a disputed claims reserve, effectively capping the total amount of general unse-
cured claims. Additionally, the debtor may file a motion with the court to establish a maximum claim
amount for individual claims. Establishing the maximum amount of general unsecured claims allows for
the calculation and distribution of interim payments to holders of allowed claims while reserving suffi-
cient assets for future distributions to disputed claim holders, to the extent such claims become allowed.

Ongoing Reporting Requirements

Although many industries and legal structures have specific reporting requirements, there are several
standard, ongoing reporting requirements between confirmation and case closing. Post emergence, reor-
ganized debtors and trustees must file quarterly postconfirmation operating reports by the 20th of the
month following quarter end until case closure. The reports must be filed with both the bankruptcy court
and the U.S. Trustee. Four such reports are required:

 Questionnaire and insurance information. This report must be submitted, even if there are no
changes from the prior periods. New insurance certificates, if any, must be submitted with the
report if there are any changes in coverage.

 Chapter 11 schedule of receipts and disbursements. All operating and plan receipts and dis-
bursements must be recorded. The total disbursements reports are used to determine the quarterly
fees due to the U.S. Trustee. Even if no disbursements are made, a minimum quarterly fee will
be due.

 Bank account reconciliation. All accounts and negotiable instruments must be included.

 Cash, debit, and check disbursement detail. Total disbursements must reconcile to the data re-
ported on the schedule of disbursements. All checks must be listed sequentially and all check
numbers must be accounted for, even if they were voided. If automated check systems are uti-
lized, computer-generated reports from those systems are acceptable to meet the reporting re-
quirements — as long as the data is sorted by check number and there are no gaps in the sequen-
tial numbering.

Failure to submit these reports in a timely manner will result in serious consequences, including possible
case dismissal or conversion of the case to a Chapter 7. The U.S. Trustee website offers a sample tem-
plate for each of these reports (see appendix F). However, practitioners should seek guidance from the
local U.S. Trustee to ensure that the most current templates are used and that requirements are met.

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