Small Business Debtor Cases

The purpose of the creation of the small business case was to reduce delay and cost in uncomplicated business reorganization cases according to a case out of Colorado back in 1995.  Whether the purpose of the small business amendments has been met has been much debated, and generally because the election for a small business case was rare.

There have been some limits on what qualifies under the Bankruptcy Code as a small business case.  First of all, the code has defined the term to be a person engaged in commercial or business activities, excluding the business of owning or operating real property or activities related thereto as the primary business activity, that has total non-contingent liquidated secured and unsecured non-affiliated debt which does not exceed $2,190,000.

The Bankruptcy Code provides that a debtor who qualifies as a small business debtor shall state in the petition whether or not it is a small business debtor.  It should be noted that if the schedules filed in a case support that the debtor meets the criteria to be a small business debtor, then the debtor must check the box on the petition stating such for Chapter 11 purposes.