7 Common Mistakes in Chapter 11 Monthly Operating Reports—and How to Fix Them
Even well-intentioned debtors and their advisors slip up when filing a Chapter 11 Monthly Operating Report (MOR). A single mistake can trigger intensified U.S. Trustee scrutiny, damage credibility, or even lead to case dismissal. Below, we break down seven frequent MOR pitfalls and the proven steps you can take right now to stay in compliance and keep your reorganization on course.
1. Filing the MOR Late—or Not at All
Why it matters: The U.S. Trustee requires each Chapter 11 MOR by the 21st day after month-end. Late or missing filings violate court orders and can prompt a motion to convert or dismiss.
Quick fix:
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Set an internal “draft due” date one week before the deadline.
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Use calendar reminders for every responsible team member.
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If an unavoidable delay arises, notify the U.S. Trustee in writing before the deadline.
2. Omitting Required Forms and Attachments
An MOR is a package, not a single page. Missing attachments undermine transparency.
Must-include checklist:
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Monthly balance sheet and P&L
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Bank statements for all DIP accounts
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A/R & A/P aging schedules
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Detailed disbursements list
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Post-petition debt schedules
Use the same list each month so nothing falls through the cracks.
3. Arithmetic Errors & Inconsistent Figures
Mismatched totals or unreconciled cash balances cast doubt on your bookkeeping.
Prevent errors with:
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A second-person review.
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Excel formulas for auto-totals.
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A reconciliation line (Opening Cash + Receipts – Disbursements = Closing Cash) that ties out to the balance sheet.
4. Commingling Funds or Skipping DIP Accounts
All post-petition activity must flow through approved debtor-in-possession (DIP) accounts.
Action steps:
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Close pre-petition accounts immediately after filing.
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Route every dollar through the DIP accounts.
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Disclose any court-approved exceptions and report those balances separately.
5. Under-Reporting Post-Petition Taxes & U.S. Trustee Fees
Falling behind on payroll taxes or quarterly UST fees is an instant red flag.
Stay current by:
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Showing accrued but unpaid taxes on each MOR.
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Scheduling UST fees based on quarterly disbursements.
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Explaining any temporary arrears—and the repayment plan—in the notes.
(See 28 U.S.C. § 1930 for fee guidelines.)
6. Leaving Unusual Items Unexplained
Large asset sales, professional-fee spikes, or sudden revenue drops need context.
Best practice: Add a “Variance Notes” section. One-line explanations—e.g., “$50k equipment sale in April”—eliminate guesswork for creditors and the court.
7. Ignoring U.S. Trustee Deficiency Notices
Silence equals non-compliance.
Your game plan:
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Acknowledge the deficiency within 24 hours.
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File an amended MOR or address the issue in the next report.
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Confirm with the assigned analyst that the correction is satisfactory.
Keep Your Chapter 11 Reporting on Track
Accuracy, completeness, and timeliness are the pillars of a successful reorganization. By steering clear of these seven mistakes, you protect your case—and your client’s future.
Need expert help? TrueScope Consulting has filed and audited hundreds of MORs nationwide. Schedule a free 30-minute consultation to make sure your next report meets every requirement.
