Page 45 - Bankruptcy Volume 1

Schedule E/F

Schedule E/F contains three separate sections to identify creditors who have a priority (part 1), are not
entitled to a priority (part 2), or are simply to be notified of the bankruptcy (part 3).

Priority liabilities are as detailed in Section 507 of the Bankruptcy Code. Examples of priority liabilities
include certain employee claims (not to exceed $12,850) fn 2 , contributions to employee benefit plans
(not to exceed $12,850 per employee and earned 180 days prior to the petition date) and taxes, customs
duties, and penalties owing to federal, state, and local governmental units as set forth in 11 USC
507(a)(8). It should be confirmed that a priority claim is not covered by a first-day motion and being
paid in the normal course of business before listing on Schedule E/F. Many, but not all (for instance,
severance), employee obligations will be covered in this manner. If not covered by a first-day motion,
priority tax schedules are typically listed with some combination of a C, U or D flag and in an "unde-
termined" amount on Schedule E/F, as tax audits can create uncertainty that warrants this treatment.
Once again, counsel should be included in these strategic decisions regarding the content and presenta-
tion of Schedule E/F.

All other liabilities not appropriate for Schedule D (secured obligations) or in part 1 as priority unse-
cured obligations should be listed on part 2 as unsecured, nonpriority claims. Liabilities typically includ-
ed on part 2 include trade payables, litigation, and unclaimed property. Once again, all claims or poten-
tial claims should be listed on either Schedules D or E/F even if the validity of a claim is in question. C,
U, and D flags can be used to reflect the debtor’s perception of the nature and legitimacy of the liability.
Including all creditors on the schedules allows each creditor to be noticed and to participate in the claims
process, moving the debtor closer to the ultimate goal of discharging or resolving the liability.

Part 3, the notification section of Schedule E/F, is utilized to alert other creditors with whom the compa-
ny has done business regarding the existence of the bankruptcy. This provides the creditor with the op-
portunity to file a proof of claim should they believe they have an outstanding obligation from the debtor
entity.

Schedule G

Schedule G is a listing of all executory contracts and unexpired leases of a debtor. An executory contract
is a contract in which continuing obligations exist by both the debtor and the contract counterparty or
counterparties. Counsel should be consulted if the question of whether a contract is executory or not
arises. For example, purchase or sales orders can be considered executory, but counsel should opine as
to whether these types of agreements are appropriate for Schedule G. Types of agreements that will be
included on Schedule G typically include real property leases, equipment leases, maintenance contracts
and master purchase agreements. There is no materiality threshold for Schedule G, so all contracts re-
gardless of the perceived significance of the contract (for example, water delivery or extermination ser-
vices) must be listed. The descriptions of the executory contracts and unexpired leases can be brief but
should provide enough detail so there is no question by the parties involved as to which contract or lease
is being referenced. If possible, the start or commencement date of the contract or lease should be in-
cluded to provide a point of reference to help avoid this type of confusion. Additionally, contract or
lease amendments, schedules, addenda, and attachments do not have to be listed separately on Schedule

fn 2 Amounts are adjusted for inflation every three years on April 1. The next adjustment, if any, is scheduled for 2019.

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