The U.S. Trustee Program’s (USTP) rule entitled Uniform Periodic Reports in Cases Filed Under Chapter 11 of Title 11 (Final Rule) became effective on June 21, 2021, and provided for the filing of a single Monthly Operating Report and a single Post-Confirmation Report in non-small business Chapter 11 cases. This article highlights key benefits of the two reports, provides an update on enhancements made to the reporting process since June 2021, and shares important practice tips.
The New Reports
To help bankruptcy professionals transition to the new Monthly Operating Reports (MORs) and Post-Confirmation Reports (PCRs), USTP staff provided training nationwide on how to complete, finalize, and file the new forms. In July 2021, the first new forms were filed, and since then bankruptcy professionals have filed thousands of MORs and PCRs with bankruptcy courts across the country. The bankruptcy community appears to have made a smooth transition to reporting under the Final Rule. The success of the transition is a credit to the bankruptcy community and reflects the shared and ongoing commitment to greater transparency and efficiency in the bankruptcy system.
Benefits of the New Reports
In addition to the uniformity and consistency provided by having a single MOR and PCR for use in every non-small business Chapter 11 case, the updated forms confer several other new and important benefits.
Modernization: The new MORs and PCRs represent a significant advance in Chapter 11 periodic reporting. The data-embedded “smart forms” allow users to enter and save data in interactive, fillable PDF forms. Plus, with embedded data, the forms offer enhanced searching and extraction capabilities. To simplify data extraction, the forms employ standard barcode technology used widely across government and industry, such as on postage stamps, RealID driver licenses, common carrier shipping labels, and boarding passes issued by commercial airlines. To enhance the user experience with periodic reporting, the USTP introduced MORs and PCRs that are compatible with Windows and Mac operating systems.
Simplicity: The MOR and PCR forms contain easy to understand questions and are accompanied by clear and concise instructions that guide filers through the steps required to complete, save, and finalize reports for filing with bankruptcy courts on CM/ECF.
Transparency: Transparency is a vital pillar of the bankruptcy system. To advance that important interest, the Final Rule requires that MORs and PCRs be filed with bankruptcy courts on CM/ECF. Prior to the effective date, there was no universal filing requirement. Publicly accessible reports promote transparency by providing non-party stakeholders—including members of Congress, the public, academics, and the press—access to information across cases and districts. With greater access to data summarizing Chapter 11 debtors’ post-petition operations, stakeholders can more effectively analyze and report on the operational results of the bankruptcy system.
Enhancements to the Reporting Process
The Final Rule, new forms, and accompanying instructions are the byproduct of the USTP’s collaboration with numerous stakeholders in the bankruptcy system, both before and after the effective date. In response to internal and external stakeholder feedback, the USTP acted quickly to implement certain items that already have enhanced the reporting process. Some key examples follow.
The USTP recognized the need for an efficient and effective way to share important information about periodic reporting with stakeholders across the country. To fulfill that need, the USTP created the “Chapter 11 Operating Reports Email Updates” feature on its website. Presently, almost 1,000 stakeholders nationwide have enrolled to receive email updates from the USTP about periodic reporting. Recent updates were provided in late 2022, when the USTP: (i) announced that updated instructions for MORs and PCRs were posted on its website for immediate use; and (ii) explained how to avoid a mismatch between data reflected on the face of a form and the data embedded in the barcodes by highlighting the need to generate new barcodes any time a report is edited after the “Generate PDF for Court Filing and Remove Watermark” step has been completed.
In December 2021 (about six months after the effective date of the Final Rule), the USTP incorporated barcode technology into the MOR and PCR forms. The barcodes contain the embedded data reflected on the face of the forms, and they provide visual confirmation that the forms have been finalized properly for filing with the bankruptcy court on CM/ECF. Specifically, the presence of barcodes signifies that each field on the form has been completed and that the forms’ data embedded features have been activated properly, thereby preventing the filing of incomplete or flattened forms. The barcodes are generated at the end of the forms automatically after filers complete the “Generate PDF for Court Filing and Remove Watermark” step. Additionally, the barcodes further the Congressional mandate in the Bankruptcy Abuse Prevention and Consumer Protection Act that the new forms “facilitate compilation of data” and maximize public access to the data contained on the forms by providing parties-in-interest, the public, academics, and the press an efficient means of aggregating data from a high volume of reports filed across the country.
The USTP has also helped several national financial advisory firms transition to reporting under the Final Rule. These firms routinely represent hundreds of debtors in large cases across the country. In addition to answering substantive, procedural, and technical questions through ongoing discussions, the USTP provided schema and data dictionaries for the MORs and PCRs to help the firms design electronic tools to expedite the process of populating individual reports for debtors in large jointly administered Chapter 11 cases. During the ongoing collaboration, the USTP also tested numerous forms prepared by the firms to ensure that their respective methods successfully embedded data in the new forms.
In response to stakeholder feedback received since the effective date, the USTP issued updated Instructions for both the MOR and PCR forms in December 2022. With several substantive, procedural, and technical revisions, the updated Instructions help clarify certain questions raised by stakeholders. The updated Instructions are available on the USTP’s website.
An important feature of the USTP’s commitment to efficiency in the reporting process is the on-demand technical support that it provides to all stakeholders. In addition to offering user-friendly “Troubleshooting Tips” on its website, the USTP provides email access to a team dedicated to responding to technical inquiries related to MORs and PCRs. By emailing inquiries to [email protected], stakeholders can obtain individualized assistance when the need arises. The USTP immediately acknowledges receipt of every email with an automated response that provides troubleshooting tips addressing many commonly asked questions. Quite often stakeholders quickly reply to the automated response indicating that it was all they needed to resolve their inquiry. For instance, one of the most common inquiries involves stakeholders using the prior version of the forms that were deactivated and removed from the USTP’s website in December 2021. Once directed to the active forms on the USTP’s website and provided a hyperlink for quick access, those inquiries are resolved. If these common answers do not resolve the issue, a USTP representative contacts the inquirer directly to work out a solution. Since the effective date in June 2021, the USTP team has successfully resolved hundreds of inquiries from across the country.
On the rare occasion when inquiries are too complex to be resolved by email, the USTP team engages with stakeholders telephonically or by video conference. In one recent instance, a debtor’s counsel had difficulty generating barcodes on an MOR despite using the correct version of the form and following the instructions step by step. To ensure that the forms could be finalized and filed prior to the impending deadline, two members of the USTP team immediately video-conferenced with counsel, working together for an hour. During that time, the USTP team not only diagnosed and corrected the problem—an incorrect default computer setting—but ensured that counsel understood how to finalize and file forms on their own. Since then, counsel has continued to file forms without the need for further USTP assistance.
Whether substantive, procedural, or technological, the post–effective date enhancements will continue to promote the efficiency and transparency of the reporting process.
Efficiency in the bankruptcy process is a mission priority for the USTP. To further that priority, the USTP recommends that stakeholders responsible for preparing or filing MORs and PCRs adopt the practice tips that follow.
- Take the time to become familiar with the reports and the completion and filing processes. Get acquainted with the periodic reporting resources that the USTP offers by visiting its “Chapter 11 Operating Reports” webpage where stakeholders can find updates, forms, Instructions, Troubleshooting Tips, and other resources and information.
- Always start your reports by downloading the latest version of the form from the USTP website. To start the reporting process, download the latest version of the MOR or PCR form from the USTP website. Be sure to select the form that is compatible with the filer’s operating system (i.e., Windows or Mac). After downloading the MOR or PCR, launch Adobe Reader or Adobe Acrobat to complete the PDF version of the form—do not attempt to complete the form in an internet browser. For step-by-step assistance with this process, consult the Guide for Opening the MOR/PCR Forms posted on the USTP’s website. Note that once you download the latest version of the forms, you can begin by working from an editable version from a prior reporting period, rather than downloading a new form each month or quarter.
- Always complete the forms electronically without inserting or attaching anything. Complete the MOR and PCR forms electronically and do not flatten the forms when finished (i.e., do not print and scan the forms before filing). In addition, do not insert or attach additional pages to the forms. Any supporting documentation, including exhibits, explanatory notes, or bank statements, must be filed as separate PDF attachments.
- Follow the MOR or PCR instructions to prepare your reports for filing. Once all the required information has been entered onto the MOR or PCR and an editable version has been saved, select the “Generate PDF for Court Filing and Remove Watermark” button at the end of the form. Although this step will not file a report with a bankruptcy court, it is required to remove the watermark, embed data, and generate barcodes on the report. To ensure that all data is embedded in the version of the form to be filed with the bankruptcy court, do not edit a report after the watermark has been removed. If last-minute changes to a report are required, revert to the editable version of the report and simply repeat the “Generate PDF for Court Filing and Remove Watermark” step after making the edits. For step-by-step guidance on this process, consult the Instructions for the MOR and PCR posted on the USTP’s website.
- File your reports using the correct CM/ECF docket entry as a stand-alone PDF. When filing forms with the bankruptcy court, select the correct docket entry on CM/ECF established by the local court for MORs or PCRs. In addition, file all pages of each report, including all barcodes. File each report as a stand-alone PDF, and do not combine multiple reports or barcodes into a single PDF.
- Use the technical assistance available on the USTP website and through a dedicated help email. Visit the “Troubleshooting Tips” page on the USTP’s website for technical guidance. If further assistance is required, filers can request technical assistance with MORs and PCRs by emailing inquiries to [email protected]. The USTP has a team dedicated to responding to MOR- or PCR-related technical inquiries. Case-related inquiries may be directed to the local USTP office overseeing the Chapter 11 case, as before.
- Sign up for the USTP’s subscription service to receive all updates on the forms and Instructions. Finally, stay informed by taking advantage of the USTP’s subscription service. Subscribers will receive emails about updated forms, Instructions, and other important information related to periodic reporting under the Final Rule. To subscribe, visit the Chapter 11 Operating Reports webpage.
Periodic reporting remains a vital part of every Chapter 11 case. Fiduciaries have an obligation to account for estates’ operational and financial performance, both pre- and post-confirmation. With those fiduciaries reporting on the modernized and streamlined MORs and PCRs for over a year now, stakeholders in the bankruptcy system have benefitted from increased uniformity, consistency, and transparency. With almost 39,000 MORs and PCRs filed with bankruptcy courts across the county, the USTP is encouraged by stakeholders’ performance under the Final Rule, and it looks forward to the enhanced efficiency and transparency in the bankruptcy system that the new MORs and PCRs provide.
28 C.F.R. § 58.8. The forms promulgated under the Final Rule are designated as UST Form 11-MOR and UST Form 11-PCR. These forms are applicable only in judicial districts where the USTP operates. ↑
For an extensive discussion of the rule-making process, including discussion of the public comments, testimony at the public hearing and the USTP’s response, refer to the article entitled Introducing the USTP’s New Chapter 11 Periodic Reports, published in the February 2021 edition of the American Bankruptcy Institute Journal, at page 24. ↑
28 U.S.C. § 589b(b). ↑