6 Things That Differ by District in a Georgia Chapter 11 Bankruptcy

A lot of states have more than one bankruptcy court, but Georgia has three, and that means at least six differences in the way Chapter 11 works here. You’ll wind up in the Northern, Middle or Southern district according to where your business is. The Chapter 11 process is similar across Georgia, but each district has its own set of local forms, rules and ways of doing things.

The first difference is simply the courthouse. Next there are the rules for big cases in the Northern District. Differences in which forms you have to file on day one and what some of those forms need to say. The Northern District also has extra requirements for hiring lawyers and looking after creditors’ claims. The Middle District has rules just for small businesses in Chapter 11. The last differences are in the Southern District, about your responsibilities after the court approves the plan.

Three Districts

If your principal place of business is in Georgia then one of its three districts gets your file. The Northern District is split four ways, with divisions at Atlanta, Newnan, Gainesville and Rome. The Southern District takes in six divisions. They are Augusta, Brunswick, Dublin, Savannah, Statesboro and Waycross. The first digit after the dash in a case number tells you which of the six divisions within the district has the case.

The Northern District has rules just for large Chapter 11 cases. The definition of large isn’t strict, but usually involves over $25 million in assets or debt, not counting insider debt. Individual filings and single-asset real estate generally can’t qualify unless circumstances justify it.

Since November 5, 2019, an affidavit must support any request for an expedited or complex hearing. A debtor seeking complex status must state the number of parties in interest. The Atlanta Division now has a special judge panel for large complex cases. It applies only there.

The Northern District also has its own guidelines for hiring lawyers, accountants and other professionals, and for the cases filed either prepackaged or prenegotiated. Prepackaged cases are those where the debtor has already negotiated the reorganization plan with major creditors before filing. Then there are claims bar dates, which are deadlines for filing claims. A creditor who misses that deadline may lose its vote on the plan and its right to payment from the plan. Claim bar dates are set by court order in the Northern District. Under one judge’s sample order, the debtor’s lawyer has to deliver that order to all creditors within 72 hours.

In the Middle District it’s the other way around from the Northern District, with a streamlined set of procedures for small businesses. Starting February 19, 2020, the Middle District began following Interim Local Rules for subchapter V cases, on top of its general local rules. Subchapter V was created with the Small Business Reorganization Act of 2019. The idea was to streamline the chapter 11 process and cut down on costs. Every subchapter V case gets a trustee right off the bat. Only the debtor can file a reorganization plan, however. Subchapter V eligibility works the same way everywhere. To be eligible, your total debt has to be $3,424,000 or less, and at least half of it has to come from the business.

In the Southern District, the final report has to be filed within 30 days after the plan is confirmed, and an application for a final decree within 180 days unless the court sets a different deadline. And a Chapter 11 petition filed on paper needs an original plus 5 copies.

The Same Core Elements

Chapter 11 is mostly the same no matter which courthouse your case goes to. The debtor proposes a plan of reorganization, the creditors vote on it, and the court may confirm it. The debtor in possession keeps running the business under court supervision, filing reports on its cash flows and financial results, and participating in hearings. Since June 21, 2021, all three Georgia districts use the same national U.S. Trustee forms for monthly operating reports, except in small business cases and under Chapter 11 Subchapter V. The debtor has to pay a quarterly fee to the U.S. Trustee for their oversight. It’s based on total disbursements by the debtor in each quarterly period, from $325, at the least, up to $30,000. The U.S. Trustee monitors the debtor’s compliance with court orders. When the debtor misses its reports it runs the risk of conversion to another chapter or dismissal of the bankruptcy case, but this doesn’t always happen.

Doing Your Homework Early

It may sound complicated. It is complicated. But it’s also doable. Doing your homework early is especially important in Chapter 11. As you plan your bankruptcy, work out how things will go at the courthouse, not just in the law books. Take a look at what the local rules are before you file for Chapter 11 in Georgia.