When a company files for Chapter 11 bankruptcy, it must navigate numerous challenges and adapt to operating under the Bankruptcy Code. To facilitate this transition, the company typically files a series of motions known as “First-Day Motions” shortly after the bankruptcy petition is filed. These motions aim to prevent a complete shutdown of operations and reduce administrative burdens. They are addressed at a “First-Day Hearing,” which usually occurs within one or two days of the case commencement.
First-Day Motions can be either ministerial or substantive. Ministerial motions seek procedural or administrative relief to help the company transition into bankruptcy and are often unopposed. Examples include motions for joint administration, extending the time to file schedules and statements, establishing noticing and case management procedures, and retaining a claims agent. Substantive motions, on the other hand, seek to ensure the company continues to operate post-petition and often require interim relief at the First-Day Hearing. These motions may include requests to pay employee wages, pay critical vendors, obtain financing, continue insurance, pay utility providers, and maintain the cash management system.
Creditors must pay close attention to First-Day Motions, as the relief sought can directly or indirectly affect their rights. It is crucial for creditors to review these motions carefully and object when necessary to protect their interests. Given the timing and potential consequences, creditors should consult with legal counsel immediately upon the filing of First-Day Motions to ensure their rights are adequately safeguarded. Read full article here.