Monthly Operating Reports in Chapter 11: 5 Numbers the US Trustee Reads First

A monthly operating report is a confession the business makes on a schedule. Each month, over a signature given under penalty of perjury, the debtor in possession tells the United States Trustee, the court, and every creditor with a PACER login how much cash it has, where the cash went, and whether it paid anyone it should not have. The form was built so that a stranger could read it in minutes.

Which form depends on the case. Since June 21, 2021, under 28 C.F.R. 58.8, chapter 11 debtors other than small business and Subchapter V debtors report on UST Form 11-MOR, a data-embedded form due, unless local rules say otherwise, by the 21st day of the month after the period covered. Small business and Subchapter V debtors use Official Form 425C under Bankruptcy Rule 2015(a)(6) until a plan is confirmed. No rule tells the United States Trustee which line to read first, and no published guidance ranks them. The five figures below are the ones the forms themselves, and the grounds for dismissal in section 1112(b)(4), give the most weight.

1. Ending Cash, and Whether It Agrees With the Books

Part 1 of the MOR is four lines of arithmetic. Line a is cash at the beginning of the month, line b total receipts, line c total disbursements, and line d the ending balance, which the UST's MOR instructions say "should match the ending cash balance on the debtor's books," allowing only for rounding and certain consolidated accounting adjustments. On Form 425C the same sequence runs from line 19 to line 23, and the form warns that ending cash may differ from the bank balance because of outstanding checks or deposits in transit.

The first report has a wrinkle that owners miss. Beginning cash on the first MOR is total cash on the petition date, but an overdrawn account is entered as zero rather than netted against the others, because, in the instructions' words, "overdrawn accounts are not assets of the debtor but rather claims against the debtor." A hypothetical company filing with $52,000 in one account and a $7,000 overdraft in another reports $52,000, not $45,000. The overdraft belongs on the other side of the ledger, as a debt owed to the bank.

The ending cash figure is where a reader begins to test everything else. If receipts minus disbursements does not produce the change in cash, something is missing, and the missing thing could be anything from a timing difference to, stated less charitably (or, to be exact, stated the way a creditor's lawyer would state it at a hearing on a motion to convert), a deposit into an account the debtor never reported. Region 21 requires non-individual debtors to attach the statements issued by each bank for the month, so the reconciliation can be done by anyone with the docket open. The number was designed to be checked. An owner who treats it as a summary rather than a claim has misread the form.

2. Total Disbursements, Because the Fee Is Built on Them

Line f of Part 1, "total disbursements for quarterly fee calculation," adds disbursements by the debtor to disbursements made by third parties for the estate's benefit, such as a principal paying a bill on the company's behalf. The instructions define disbursements "broadly to mean all payments made by, or on behalf of, a debtor."

That number sets the United States Trustee's quarterly fee in a traditional chapter 11. Under the Program's schedule effective April 1, 2026, a quarter with disbursements of $62,625 to $999,999 carries a fee of 0.4 percent of disbursements, and a quarter below that range carries a flat $250. A hypothetical business disbursing $100,000 a month owes about $1,200 for the quarter. Subchapter V cases pay no quarterly fee at all, which is one of the reasons the election matters.

The fee is also a ground for dismissal. Section 1112(b)(4)(K) counts failure to pay fees owed under chapter 123 of title 28 as cause to convert or dismiss the case, and Region 21's guidelines say a failure to report disbursements lets the office estimate them.

3. Postpetition Taxes That Are Past Due

Part 2, line i asks for postpetition taxes past due. Part 7, question f asks whether all trust fund taxes due by the end of the period were remitted. Form 425C asks, at question 6, whether the debtor timely filed its returns and paid its taxes.

A nonzero line i is a sentence the debtor wrote against itself. Section 1112(b)(4)(I) names the failure to pay postpetition taxes as cause.

4. Payments on Old Debts and Payments to Insiders

Part 7 is a questionnaire, and two of its answers carry dollar amounts behind them. Question a asks whether any payment was made on a prepetition debt; a yes requires an attachment listing the date, the payee, and the amount of each payment. Question c asks whether any cash or noncash payment was made to or on behalf of an insider, which the instructions illustrate with salaries, expense reimbursements, life insurance premiums, and the use of the debtor's cars or real estate.

Form 425C asks the same things in plainer language. Question 17: whether the debtor paid any bills owed before filing. Question 18: whether checks written before filing were allowed to clear. Question 12: whether assets were sold or services provided to anyone related to the debtor. You answer yes, you attach the explanation, and the explanation is what gets read.

A business with merchant cash advances sees this line tested in a particular way. An automatic debit that survived the filing, because the funder's authorization was never revoked on an old account, is a payment on a prepetition debt whether or not anyone at the company authorized it that month, and it belongs on the report. The report is honest or it is not; the funder's conduct is a separate question for counsel.

5. Profit or Loss Since the Petition, Measured Against the Projection

Part 4, line k asks for profit or loss for the month and cumulatively since the petition date, taken from the debtor's books rather than calculated from the lines above it. The cumulative column is the one that ages. Month three of a case can absorb losses that month nine cannot.

Section 1112(b)(4)(A), in the text available at 11 U.S.C. 1112, lists as cause "substantial or continuing loss to or diminution of the estate and the absence of a reasonable likelihood of rehabilitation." Both halves must be present. A loss alone is not cause; a loss with no believable path out of it is.

Form 425C makes the second half visible without anyone asking. Lines 32 through 34 set last month's projected receipts, disbursements, and net cash flow beside the actual figures and compute the difference, and the form directs that the first month's projections match those given at the initial debtor interview. A debtor that projects $60,000 in receipts and collects $41,000 has written a $19,000 variance into a sworn report. Once is a bad month. A column of misses reads as something else, and on the 11-MOR the instructions forbid "global notes" that "seek to undermine or minimize the gravity" of the certifications, so the debtor cannot footnote its way out.

The report does not argue. It accumulates.

What the Reports Presuppose

Every figure above assumes a business already inside chapter 11 with counsel preparing and filing its reports, and that is where questions about them belong. Delancey Street, which is not a law firm and handles negotiated business debt resolutions, works with owners who have not filed, through a free and confidential review of funder contracts, bank activity, and liens to see whether an agreement is realistic, with independently licensed attorneys for anything legal. A business whose cash cannot survive another month of daily debits may belong in a case, and the review should say so. The monthly report will then ask for the same numbers the owner could have gathered first, at a quieter time, from the same bank statements.