Business Bankruptcy–Bankruptcy Rules and Crimes
Business Bankruptcy – Simplified Operating Guidelines
A "How-To" Manual
For Non-Bankruptcy Professionals
Robert S. Apfelberg, Karrie L. Bercik, Esq.
Chapter 6. Bankruptcy Rules and Crimes
During the administrative period the debtor’s management may not allow any funds to be used for: (i) payment of pre-petition debts, (ii) loans to insiders or affiliates, (iii) payment of debts guaranteed by insiders if other creditors are not receiving pro-rata amounts, (iv) gaming or highly risky endeavors, and (v) unreported or deceptively reported purposes. Additionally the debtor may not: (i) write a check unless there are sufficient funds in the account at the time, (ii) bounce checks, (iii) fail to pay any administrative period debts as agreed, (iv) operate at a loss, and (v) fail to pay: (a) employees salaries, (b) withholding taxes "trust funds", and (c) sales taxes, etc., in a timely manner.
The consequence for violating these procedures is generally dismissal of the bankruptcy, or conversion to a chapter 7 liquidation. However, OUST, and the bankruptcy court, have increasingly been referring individuals performing deliberate and significant bankruptcy code violations for "bankruptcy crime" investigations. Conduct that may have been a minor problem Pre-petition can become a bankruptcy crime during the administrative period.