What is a Monthly Operating Report?
A San Diego bankruptcy attorney explains: What is a Monthly Operating Report?
A Monthly Operating Report (often called an “M.O.R.”) is a periodic snapshot of a debtor’s finances. This monthly operating report allows the creditors in a Chapter 11 bankruptcy to see the status on the debtor’s financial situation. This is crucial because the creditor must assess how it will (or if it will at all) modify its debt or contracts with the debtor through the bankruptcy. Recall that a Chapter 11 is a reorganization. Unlike a Chapter 13, however, where the court can compel a lender to change what is owed to it or declare a lien wholly unsecured, even over the lender’s objection, a Chapter 11 is a chorus of creditors and lenders agreeing to accept modified terms of debt repayment independent of the court. A monthly operating report allows the creditor to see into the debtor’s cash flow, inventory, business model, corporate structure, etc. to decide how far it is willing to bend. A debtor’s failure to timely prepare and submit the monthly operating report can be grounds for dismissal of the case. This makes sense, for without the monthly operating report, the Chapter 11 bankruptcy cannot be advanced: it takes informed decisions to reorganize and the M.O.R. is the means of conveying that information.
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