How First-Day Motions Can Be Integral to a Successful Chapter 11

First-day motions are expedited requests filed at the outset of a Chapter 11 case to address immediate operational needs. Their purpose is to stabilize the business, maintain continuity and preserve the value of the estate during the critical early stages of the bankruptcy process.

First-day motions — so named because they are typically heard within the first few days after a Chapter 11 filing — help ensure that the business can continue operating while restructuring efforts begin. They are aimed at preventing operational disruption, maintaining liquidity, preserving relationships with employees, suppliers and customers and creating the foundation for a viable reorganization by stabilizing the business before negotiations even begin.

The most common first-day motions are these:

• A cash collateral motion allows the debtor organization to access and use restricted funds preserved for secured creditors, subject to giving “adequate protection” measures to ensure the creditors’ interests are not diminished. 
• A payroll motion allows the debtor to pay wages, salaries and employee benefits owed prior to filing the petition, as well as to continue paying employee wages and benefits, in order to prevent the loss of talent that could hurt company stability.
• A critical vendors motion helps the debtor pay pre-petition claims of vendors who provide goods or services that cannot be easily replaced, thus helping maintain supply chains and business relationships that are essential to ongoing operations.
• A debtor-in-possession financing motion is designed to provide access to new funding to pay for operational expenses during Chapter 11.
• Cash management motions seek to allow the debtor to continue using existing bank accounts and financial systems, avoiding unnecessary disruption.
• Utilities motions seek orders preventing utility providers from discontinuing service due to unpaid pre-petition bills, in return for adequate assurances of future payments. 

Each of these motions must be carefully prepared, supported by detailed financial information and narrowly tailored to address only what is necessary to keep the business running. Courts often grant these motions on an interim basis, subject to further review and possible objections from stakeholders.

An experienced Chapter 11 attorney can manage the work of identifying which first-day motions are necessary, gathering supporting evidence and handling pre-argument negotiations that may be amenable to the motions’ success.

The Law Offices of Michael Jay Berger in Beverly Hills assist businesses throughout southern California with the numerous challenges pursuing a successful Chapter 11 bankruptcy. Schedule a free initial consultation by calling 310-271-6223 or contacting us online.