[Federal Register Volume 79, Number 217 (Monday, November 10, 2014)]
[Proposed Rules]
[Pages 66659-66663]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-25975]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 79, No. 217 / Monday, November 10, 2014 /
Proposed Rules
[[Page 66659]]
DEPARTMENT OF JUSTICE
28 CFR Part 58
[Docket No: EOUST 105]
RIN 1105-AB30
Procedures for Completing Uniform Periodic Reports in Non-Small
Business Cases Filed Under Chapter 11 of Title 11
AGENCY: Executive Office for United States Trustees (``EOUST''),
Justice.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Department of Justice, through its component, EOUST, is
issuing this notice of proposed rulemaking (Rule) pursuant to Section
602 of the Bankruptcy Abuse Prevention and Consumer Protection Act of
2005 (BAPCPA). The BAPCPA requires the Department to issue rules
requiring uniform periodic reports (Periodic Reports) by debtors in
possession or trustees in cases under chapter 11 of title 11. The
BAPCPA requires the Rule to strike the best achievable practical
balance between the reasonable needs of the public for information
about the operational results of the Federal bankruptcy system, undue
burden, and appropriate privacy concerns and safeguards.
DATES: Written comments must be postmarked and electronic comments must
be submitted on or before January 9, 2015. Comments received by mail
will be considered timely if they are postmarked on or before that
date. The electronic Federal Docket Management System (FDMS) will
accept comments until Midnight Eastern Time at the end of that day.
ADDRESSES: To ensure proper handling of comments, please reference
``Docket No. EOUST 105'' on all electronic and written correspondence.
The Department encourages that all comments be submitted electronically
through www.regulations.gov using the electronic comment form provided
on that site. An electronic copy of this document is also available at
the www.regulations.gov Web site for easy reference. The proposed
Periodic Reports mandated by this regulation, and their accompanying
instructions, may be viewed on the United States Trustee Program's Web
site at http://www.justice.gov/ust/eo/rules_regulations/index.htm.
Paper comments that duplicate the electronic submission are not
necessary as all comments submitted to www.regulations.gov will be
posted for public review and are part of the official docket record.
Should you, however, wish to submit written comments via regular or
express mail, they should be sent to the EOUST, 441 G Street NW., Suite
6150, Washington, DC 20530.
FOR FURTHER INFORMATION CONTACT: Ramona D. Elliott, Deputy Director/
General Counsel, Nan R. Eitel, Associate General Counsel for Chapter 11
Practice, or Larry Wahlquist, Office of the General Counsel, at (202)
307-1399 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Posting of Public Comments
Please note that all comments received are considered part of the
public record and made available for public inspection online at
www.regulations.gov. Such information includes personal identifying
information (such as your name and address) voluntarily submitted by
the commenter.
You are not required to submit personal identifying information in
order to comment on this Rule. Nevertheless, if you want to submit
personal identifying information (such as your name and address) as
part of your comment, but do not want it to be posted online, you must
include the phrase ``PERSONAL IDENTIFYING INFORMATION'' in the first
paragraph of your comment. You also must locate all the personal
identifying information you do not want posted online in the first
paragraph of your comment and identify what information you want
redacted.
If you want to submit confidential business information as part of
your comment but do not want it to be posted online, you must include
the phrase ``CONFIDENTIAL BUSINESS INFORMATION'' in the first paragraph
of your comment. You also must prominently identify confidential
business information to be redacted within the comment. If a comment
has so much confidential business information that it cannot be
effectively redacted, all or part of that comment may not be posted on
www.regulations.gov.
Personal identifying information and confidential business
information identified and located as set forth above will be placed in
the agency's public docket file, but not posted online. If you wish to
inspect the agency's public docket file in person by appointment,
please see the paragraph above entitled For Further Information
Contact.
Discussion of the Rule
The BAPCPA requires the Rule to strike the best achievable
practical balance between: (1) The reasonable needs of the public for
information about the operational results of the Federal bankruptcy
system; (2) economy, simplicity, and lack of undue burden on persons
with a duty to file these reports; and (3) appropriate privacy concerns
and safeguards. These Periodic Reports are to be used by all chapter 11
debtors who do not qualify as a ``small business debtor'' as defined in
the Bankruptcy Code at 11 U.S.C. 101(51D). Pursuant to Section 435 of
the BAPCPA, the Judicial Conference of the United States has developed
a periodic report, entitled Official Form B 25C ``Small Business
Monthly Operating Report,'' for use by small business debtors as
defined by the Bankruptcy Code. See 11 U.S.C. 101(51D), 308.
The administration of chapter 11 bankruptcy cases is entrusted to
the debtor in possession pursuant to 11 U.S.C. 1107(a) or, if
circumstances warrant, a trustee appointed pursuant to 11 U.S.C. 1104.
Debtors in possession and trustees must account for the receipt,
administration, and disposition of all property; provide information
concerning the estate and the estate's administration as parties in
interest request; and file periodic reports and summaries of a debtor's
business, including a statement of receipts and disbursements, and such
other information as the United States Trustee or the United States
Bankruptcy Court requires. 11 U.S.C. 1106(a)(1), 1107(a); Fed. R.
Bankr. P. 2015 (a)(2), (a)(3). The periodic report filed prior to the
confirmation of a plan of reorganization is generally known as the
Monthly
[[Page 66660]]
Operating Report (MOR). The periodic report filed subsequent to the
confirmation of a plan of reorganization is generally known as the
Post-confirmation Report (PCR).
Periodic reports are currently filed in bankruptcy courts across
the country and, in each jurisdiction, they serve essentially the same
purpose and convey the same information. The format of the reports and
attachments, however, may vary from jurisdiction to jurisdiction. With
the passage of the BAPCPA, Congress directed the Attorney General to
draft rules creating nationally uniform forms for chapter 11 periodic
reports for non-small business cases. Congress mandated that certain
data elements be included within the reports and granted the Attorney
General the discretion to include additional data elements. The
Attorney General delegated this authority to the Director of EOUST. In
response to this congressional mandate, the Director publishes this
Rule, which proposes to require debtors in possession and chapter 11
trustees in non-small business cases to utilize forms developed to
produce nationally uniform periodic reports rather than the local
reports currently in effect. When finalized, this Rule will not impose
requirements on the general public; it imposes requirements only upon
chapter 11 debtors in possession and trustees who are supervised by
United States Trustees.
UST Form 11-MOR and UST Form 11-PCR are the uniform Periodic
Reports forms required by this Rule. The data elements in UST Form 11-
MOR that are required by Congress are numbered (1)-(4), (8), and (9).
In UST Form 11-PCR, Congress required data element number (4); all
other data elements have been included in the EOUST's discretion via
the Attorney General's delegation of authority. The Periodic Reports
that are prepared using these forms will facilitate the review of a
debtor in possession's or trustee's case administration, which will
assist in maintaining the public's trust in the bankruptcy system.
The information collected by UST Form 11-MOR will be utilized by
the court, creditors, the United States Trustee and other parties in
interest to evaluate a chapter 11 debtor's progress through the
bankruptcy system, including the likelihood of a plan of reorganization
being confirmed and whether the case is being prosecuted in good faith.
Specifically, information collected by UST Form 11-MOR will assist the
court and parties in interest in ascertaining the following: (1)
Whether there is a substantial or continuing loss to or diminution of
the bankruptcy estate; (2) whether there is a reasonable likelihood of
rehabilitation; (3) whether there exists gross mismanagement of the
bankruptcy estate; (4) whether the debtor may have violated a cash
collateral order or other order of the bankruptcy court; (5) whether
the debtor is timely paying postpetition taxes; (6) whether the debtor
is engaging in the unauthorized disposition of assets through sales or
otherwise; (7) whether the debtor is complying with its obligation to
maintain appropriate insurance so as to avoid a risk to the estate or
to the public; (8) whether the debtor is complying with its obligation
to pay fees due under 28 U.S.C. 1930; and, (9) in the case of an
individual debtor, if applicable, whether the debtor is complying with
his or her obligation to pay domestic support obligations. This
information contributes to the decision by the United States Trustee,
or by a creditor or some other party in interest, to file a motion to
dismiss the bankruptcy case or seek conversion of the case to a case
under chapter 7. See, e.g., 11 U.S.C. 1112(b)(4)(A), (B), (C), (D),
(E), (I), (J), (K), and (P).
The information collected by UST Form 11-PCR will be utilized to
evaluate whether a chapter 11 debtor is performing as anticipated under
a confirmed plan. Specifically, information collected by UST Form 11-
PCR will assist the court and parties in interest in ascertaining the
following: (1) Whether a debtor is able to effect substantial
consummation of a confirmed plan; (2) whether the debtor is or is not
in material default under a confirmed plan; and (3) whether the debtor
is paying fees required under 28 U.S.C. 1930. If the debtor fails to
perform under the confirmed plan, the United States Trustee, creditors,
or other parties in interest may bring an appropriate motion to dismiss
the case, revoke a confirmed plan, or convert the case to a case under
chapter 7. See 11 U.S.C. 1112(b)(4)(K), (M), and (N); 11 U.S.C. 1144.
The use of these Periodic Reports will accomplish Congress's
mandate to develop uniform forms for periodic reports as directed in
the BAPCPA. The Periodic Reports will include all of the types of
information required to be collected under the statute. Much of that
information is already collected in the current forms, but not in a way
that facilitates the national compilation of the data. Because the
Periodic Reports will be uniform, they may be data-enabled to
facilitate the national compilation of the data delineated in the
statute. This will facilitate an evaluation of the efficiency and
practicality of the bankruptcy system, and may also assist Congress
when making policy decisions, without imposing significant additional
burdens upon trustees and debtors in possession. Moreover, the Periodic
Reports will include sufficient information to inform creditors and
other interested persons of the debtor's financial affairs, but they
are still concise enough so as to provide ready, meaningful access to
the information through the Internet or other means.
Periodic Reports shall be filed as a ``smart form'' with the United
States Bankruptcy Court in which the chapter 11 case is pending via the
court's Case Management/Electronic Case Filing System (CM/ECF). A
``smart form'' is a document that is data-enabled. When the document is
saved into the industry standard Portable Document Format (PDF), stored
data tags are then available for extraction and searching. When a form
is not data-enabled, where the PDF is simply an image of the form, the
data is not uniformly available for searching or extraction. The data-
enabled form builds upon the existing Adobe PDF/A standard (Version
1.4). Once the Periodic Reports are finalized, debtors in possession,
chapter 11 trustees, and members of the public may obtain blank ``smart
form'' Periodic Reports from the United States Trustee Program Web site
at www.justice.gov/ust.
The Periodic Reports, once filed in an active bankruptcy case by a
debtor in possession or trustee, will be available to the general
public at the office of the clerk of the United States Bankruptcy Court
where a case is pending during the hours established by the bankruptcy
court clerk. Members of the public should contact the clerk's office of
individual United States Bankruptcy Courts to obtain information about
the policies and procedures for inspection of Periodic Reports filed in
any particular case. Periodic Reports filed in cases are also available
through the Internet by accessing the Web site for the Administrative
Office of the United States Courts known as Public Access to Court
Electronic Records (PACER) at www.pacer.psc.uscourts.gov. In order to
access court records through PACER, users must register and obtain a
user name and password. In addition, users must pay a fee for obtaining
records through PACER.
Executive Orders 12866 and 13563--Regulatory Review
This Rule has been drafted and reviewed in accordance with
Executive Order 12866, ``Regulatory Planning and Review'' section 1(b),
Principles of Regulation and in accordance with
[[Page 66661]]
Executive Order 13563 ``Improving Regulation and Regulatory Review''
section 1(b) General Principles of Regulation. The Department has
determined that this Rule is not a ``significant regulatory action''
and, accordingly, this Rule has not been reviewed by the Office of
Management and Budget (OMB).
The costs considered in this regulation include the time incurred
by chapter 11 debtors and trustees to complete the Periodic Reports.
This information is already collected in most districts through locally
generated report forms. Additional costs, if any, should be negligible.
It is estimated that the cost to the government for developing
these Periodic Reports is approximately $67,000. The estimated cost to
develop a system to store information extracted from these reports and
to analyze the data is approximately $208,000. Over the next several
years, the EOUST anticipates utilizing base resources available for
information technology to meet the costs associated with developing the
Periodic Reports and a system to store the information extracted from
the reports. There will be no additional cost to the government or to
the public. In fact, this Rule will reduce the costs to the government
in reviewing and analyzing the information submitted by chapter 11
debtors in possession and chapter 11 trustees. Because the Periodic
Reports will be data enabled, the current system of manual review and
analysis will be replaced by a less time intensive, more automated
process.
Executive Order 13132
This Rule will not have a substantial direct effect on the States,
on the relationship between the national government and the States, or
on the distribution of power and responsibilities among the various
levels of government. Therefore, in accordance with Executive Order
13132, it is determined that this Rule does not have sufficient
federalism implications to warrant the preparation of a Federalism
Assessment.
Regulatory Flexibility Act
In accordance with the Regulatory Flexibility Act (5 U.S.C.
605(b)), the Director has reviewed this Rule and by approving it
certifies that it will not have a significant economic impact on a
substantial number of small entities. This certification is based upon
the fact that chapter 11 small business debtors are not required to
complete these Periodic Reports. Pursuant to Section 435 of the BAPCPA,
the Judicial Conference of the United States has developed a periodic
report, entitled Official Form B 25C ``Small Business Monthly Operating
Report, for use by small business debtors as defined by the Bankruptcy
Code. See 11 U.S.C. 101(51D), 308.
Paperwork Reduction Act
These Periodic Reports are associated with an open bankruptcy case.
Therefore, the exemption under 5 CFR 1320.4(a)(2) applies.
Unfunded Mandates Reform Act of 1995
This Rule does not require the preparation of an assessment
statement in accordance with the Unfunded Mandates Reform Act of 1995,
2 U.S.C. 1531. This Rule does not include a federal mandate that may
result in the annual expenditure by State, local, and tribal
governments, in the aggregate, or by the private sector, of more than
the annual threshold established by the Act ($123 million in 2005,
adjusted annually for inflation). Therefore, no actions were deemed
necessary under the provisions of the Unfunded Mandates Reform Act of
1995.
Small Business Regulatory Enforcement Fairness Act of 1996
This Rule is not a major rule as defined by section 804 of the
Small Business Regulatory Enforcement Fairness Act of 1996, 5 U.S.C.
801 et seq. This Rule will not result in an annual effect on the
economy of $100 million or more; a major increase in costs or prices;
or significant adverse effects on competition, employment, investment,
productivity, and innovation; or on the ability of United States-based
companies to compete with foreign-based companies in domestic and
export markets.
Privacy Act Statement
28 U.S.C. 589b authorizes the collection of the information in the
Periodic Reports. As part of the debtor in possession's or trustee's
reporting obligations, the United States Trustee will review the
information contained in these reports. The United States Trustee will
not share the information with any other entity unless authorized under
the Privacy Act, 5 U.S.C. 552a et seq. EOUST has published a System of
Records Notice that delineates the routine use exceptions authorizing
disclosure of information. See 71 FR 59818, 59819 (Oct. 11, 2006),
JUSTICE/UST-001, ``Bankruptcy Case Records and Associated Files.''
Providing this information is mandatory under 11 U.S.C. 704.
List of Subjects in 28 CFR Part 58 Bankruptcy; Trusts and Trustees
For the reasons set forth in the preamble, 28 CFR part 58 is
proposed to be amended as set forth below.
PART 58--[AMENDED]
0
1. The authority citation for Part 58 continues to read as follows:
Authority: 5 U.S.C. 301, 552; 11 U.S.C. 109(h), 111, 521(b),
727(a)(11), 1141(d)(3), 1202; 1302, 1328(g); 28 U.S.C. 509, 510,
586, 589b.
0
2. Add Sec. 58.8 to read as follows:
Sec. 58.8 Uniform Periodic Reports in Cases Filed Under Chapter 11 of
Title 11.
(a) Scope. The requirements of this section apply to all chapter 11
debtors who do not qualify as a ``small business debtor'' under 11
U.S.C. 101(51D).
(b) UST Form 11-MOR, Monthly Operating Report. Debtors in
possession (debtor) and chapter 11 trustees (trustee) must file with
the court and serve upon the United States Trustee, each member of any
Official Committee of Unsecured Creditors, and any governmental unit
charged with responsibility for collection or determination of any tax
arising out of such operation, monthly operating reports using UST Form
11-MOR (MOR). The MOR must contain the following:
(1) Information about the industry classification, published by the
Department of Commerce, for the businesses conducted by the debtor;
(2) Length of time the case has been pending;
(3) Number of full-time employees as of the date of the order for
relief and at the end of each reporting period since the case was
filed;
(4) Cash receipts, cash disbursements, and profitability of the
debtor for the most recent period and cumulatively since the date of
the order for relief;
(5) Asset and liability status as of the end of the reporting
period;
(6) Assets sold or transferred outside the ordinary course of
business (with or without court approval) during the reporting period
and cumulatively since the date of the order for relief;
(7) Income statement, commonly referred to as a Statement of
Operations;
(8) All professional fees approved by the court in the case for the
most recent period and cumulatively since the date of the order for
relief (separately reported, for the professional fees incurred by or
on behalf of the debtor, between those that would have been incurred
absent a bankruptcy case and those not);
(9) Information on whether tax returns and tax payments since the
date of the
[[Page 66662]]
order for relief have been timely filed and made;
(10) Payments made on pre-petition debt, other than in the normal
course of business, to secured creditors or lessors;
(11) Payments made outside the ordinary course of business without
court approval;
(12) Payments made to or on behalf of insiders;
(13) Postpetition borrowing;
(14) Insurance information, including workers' compensation,
casualty/property, and general liability;
(15) Information on whether disclosure statements and plans of
reorganization have been filed with the court; and
(16) Information regarding the payment of quarterly fees to the
United States Trustee.
(c) Individual chapter 11 debtors. Individual chapter 11 debtors,
in addition to the other provisions of the MOR, must complete Part 8
reserved for individual debtors, which includes the following:
(1) Total income during the reporting period, including income from
salary, wages, self-employment, and any other source;
(2) Total expenses during the reporting period, including expenses
related to self-employment, and unusual or significant unanticipated
expenses;
(3) Difference between total income and total expenses;
(4) Debts that are not related to self-employment that were
incurred since the petition filing date, which are past due; and
(5) Statement of whether all domestic support obligation payments
required under 11 U.S.C. 1129(a)(14) have been paid.
(d) Supporting MOR documents. At the discretion of the United
States Trustee, the debtor or trustee may be required to submit to the
United States Trustee, creditors' committee, or any party in interest
the following documentation:
(1) Statement of Cash Receipts and Disbursements that shows all
cash receipts and cash disbursements for all bank and investment
accounts;
(2) Balance Sheet containing the summary and detail of the assets,
liabilities, and equity (net worth) or deficit of the debtor. The
debtor's pre-petition liabilities and retained earnings must be
reported separately from the debtor's postpetition liabilities and
retained earnings;
(3) Statement of Operations (Profit or Loss Statement) that
compares the debtor's actual performance with projected performance;
(4) Accounts Receivable Aging, which is an aged summary of accounts
receivable including total receivables, net of doubtful accounts;
(5) Postpetition Liabilities Aging, which is an aged summary
schedule of postpetition liabilities segregated by general payables,
amounts owed to professionals, taxes, etc.;
(6) Statement of Capital Assets that identifies the book value of
all capital assets on the date of filing the petition, the book value
at the beginning of the reporting period, any additions or deletions
including depreciation, and the book value at the end of the reporting
period;
(7) Schedule of Payments to Professionals that identifies all fees
and expenses for all professionals employed in the bankruptcy case;
(8) Schedule of Payments to Insiders that includes all payments
made by the debtor to any person or entity considered an insider under
11 U.S.C. 101(31);
(9) Bank Statements and Bank Reconciliations that reflect all bank
accounts and banking transactions;
(10) Descriptions of assets sold or transferred outside the
ordinary course of business, and the terms of such sales or transfers;
and
(11) On a case by case basis, the United States Trustee may require
the debtor or trustee to provide additional information including, but
not limited to, cash disbursement register/ledger, statement of cash
flows, real estate settlement documents, contracts or loan documents,
and other records. In addition, other supporting documentation may be
required if necessary to present a complete picture of the financial
operations of the debtor's business.
(e) Deadlines for filing/submitting MOR. The MOR must be filed with
the court and submitted to the United States Trustee on a monthly
basis. Each MOR must be filed between the 21st day and the last day of
the month immediately following the reporting period covered by the
MOR. The precise deadline for filing the MOR is determined by the
United States Trustee's operating guidelines for the district in which
the case is pending. The MOR must be filed every month until one of the
following occurs:
(1) The confirmation of a plan of reorganization;
(2) The conversion of the case to chapter 7; or
(3) The dismissal of the case.
(f) UST Form 11-PCR, Post-confirmation Report. Following the
confirmation of a plan of reorganization, reorganized debtors and any
trustees who have been charged with administering a confirmed plan must
file with the court and serve upon the United States Trustee, and any
governmental unit charged with responsibility for collection or
determination of any tax arising out of such operation, post-
confirmation reports using UST Form 11-PCR. The PCR must contain the
following:
(1) Date the petition was filed and the date of plan confirmation;
(2) Summary of all post-confirmation amounts disbursed. This
summary must be divided into disbursements during the most recent
reporting period and total disbursements since the date of the
confirmation order;
(3) All pre-confirmation professional fees approved by the court in
the case for the most recent period and cumulatively since the date of
the order for relief (separately reported, for the professional fees
incurred by or on behalf of the debtor, between those that would have
been incurred absent a bankruptcy case and those not);
(4) Information regarding the recoveries of holders of claims under
confirmed plans. This information must be expressed in aggregate dollar
values and, in the case of claims, as a percentage of total claims of
the class allowed;
(5) Information on whether a final decree has been entered or
anticipated to be entered; and
(6) Information regarding the payment of quarterly fees to the
United States Trustee.
(g) Deadlines for filing/submitting PCR. The PCR must be filed with
the court and submitted to United States Trustee on a quarterly basis.
Each PCR must be filed not later than the 21st day following the last
day of the reporting (previous) quarter. The PCR must be filed every
quarter until one of the following occurs:
(1) The date of the final decree;
(2) The conversion of the case to chapter 7; or
(3) The dismissal of the case.
(h) Accounting methods. Generally Accepted Accounting Principles
(GAAP) are required to be used when completing these Periodic Reports,
except as modified by the United States Trustee or by an order of the
court. Additionally, the accrual basis method of accounting must be
used unless the cash basis method was used by the debtor prior to
filing the petition. In such cases, those sections of the Periodic
Reports utilizing cash basis method must be clearly identified.
Supporting documents must comply with GAAP as determined by the United
States Trustee, such as Statement of Position 90-7, ``Financial
Reporting by Entities in Reorganization Under the
[[Page 66663]]
Bankruptcy Code,'' as amended, when applicable, which was issued by the
American Institute of Certified Public Accountants on November 19,
1990.
(i) Certification of Periodic Reports' accuracy. The Periodic
Reports must be certified under penalty of perjury that they are true
and accurate by an individual who is authorized under applicable law to
certify on behalf of the debtor or trustee. The debtor's or trustee's
attorney must maintain possession of the Periodic Reports with original
signatures for five years, unless otherwise provided in local court
rules. A pro se debtor must submit the Periodic Reports with original
signatures to the Office of United States Trustee that is responsible
for supervising the case.
(j) Mandatory usage of Periodic Reports. The Periodic Reports must
be utilized by debtors and trustees when completing their monthly
operating reports or post-confirmation reports. All debtors and chapter
11 trustees serving in districts where a United States Trustee is
serving must use the Periodic Reports in the administration of their
cases, in the same manner and with the same content, as set forth in
this Rule.
(1) All Periodic Reports may be electronically or mechanically
reproduced so long as the content and the form remain consistent with
the Periodic Reports as they are posted on EOUST's Web site; and
(2) The Periodic Reports shall be filed via the United States
Bankruptcy Courts' Case Management/Electronic Case Filing System (CM/
ECF) as a ``smart form,'' meaning the reports are data-enabled.
Dated: October 24, 2014.
Clifford J. White III
Director, Executive Office for United States Trustees.
[FR Doc. 2014-25975 Filed 11-7-14; 8:45 am]
BILLING CODE 4410-40-P