5 MOR Metrics Subchapter V Trustees Check First — Review Checklist

A Subchapter V MOR is a monthly operating report that Subchapter V debtors must file with the court, and a Subchapter V MOR trustee review checklist is the structured tool trustees use to assess whether a case is on track for confirmation. Bankruptcy attorneys can use this checklist to identify the five financial line items trustees examine first when reviewing monthly operating reports. Trustees use these metrics to determine whether a case is on track for confirmation or requires further scrutiny before the plan can proceed.

Why MOR Accuracy Drives Subchapter V Confirmation Timing

A Subchapter V MOR trustee review checklist helps bankruptcy attorneys identify the five specific financial line items trustees examine first when reviewing monthly operating reports. Trustees use these metrics to determine whether a case is on track for confirmation or requires further scrutiny before the plan can proceed.

Subchapter V requires debtors to file a plan within 90 days of the order for relief, absent court-approved extensions.¹ Every MOR filed during that window becomes part of the evidentiary record the trustee uses to assess feasibility. An MOR with errors or omissions forces the trustee to request supplemental information, which delays the confirmation hearing.

Trustees review initial two-week cash collateral budgets to confirm only essential expenses like payroll, utilities, and insurance are included.² When subsequent MORs deviate from those approved budgets without explanation, the trustee flags the discrepancy. The Subchapter V Task Force Final Report, issued April 23, 2024 by ABI, addresses plan filing and case management procedures that directly affect how trustees evaluate MOR consistency.³

Each MOR that requires a follow-up inquiry pushes the confirmation timeline by two to four weeks. For a debtor operating on thin margins, that delay can mean the difference between a confirmed plan and a dismissal motion.

Line Item 1: Cash Balance Reconciliation and Account Suffix Matching

Trustees compare the MOR-reported cash balance against bank statements for every operating account. The most common error is reporting a combined balance across multiple accounts without listing each account separately with its last four digits.

If a Sub V debtor has three operating accounts and the MOR reports a combined cash balance that differs from the sum of individual bank statements, the trustee will ask which account is unreconciled. The trustee needs to see:

A variance of even a few hundred dollars triggers a request for reconciliation. Trustees expect the debtor to explain timing differences such as outstanding checks or deposits in transit. If the debtor cannot produce a bank statement within three business days of the request, the trustee notes the deficiency in the case docket.

Line Item 2: Accounts Receivable Aging and Projected Collection Timing

Trustees examine the accounts receivable aging schedule to determine whether the debtor's projected plan payments are realistic. A Sub V debtor with a significant percentage of receivables that are 90+ days past due cannot credibly project plan payments based on those same receivables.

The trustee looks for three specific data points: total AR balance, percentage over 60 days, and historical collection rate. For instance, suppose a debtor reports $500,000 in total receivables but $300,000 is over 90 days old. The trustee will ask whether those aged receivables are collectible or should be written down.

If the debtor collected only a modest percentage of current-month receivables in prior months but projects a much higher collection rate in the plan, the trustee will require an explanation. The MOR should include a footnote showing the prior three months' collection rates to support the projection.

An aging schedule that includes receivables from a customer who filed its own bankruptcy is misleading unless the debtor has filed a proof of claim and can demonstrate collectibility. Trustees flag these entries immediately.

Line Item 3: Accounts Payable Aging and Priority vs. General Unsecured Classification

Trustees review accounts payable aging to verify that the debtor is classifying obligations correctly between priority and general unsecured categories. Misclassification is one of the most common errors that triggers a UST objection.

The trustee checks whether post-petition payables are being paid currently as required by 11 U.S.C. §§ 1107–1108. If the MOR shows post-petition payables aging beyond 30 days, the trustee will ask why the debtor is not paying current obligations.

Trustees also examine whether the debtor is paying pre-petition priority claims (wages, taxes) before general unsecured creditors. An MOR that shows payments to unsecured vendors while priority claims remain unpaid will draw an objection. The trustee expects the debtor to explain the payment hierarchy in the MOR narrative.

Line Item 4: Payroll Tax Trust Fund Obligations and Adequacy of Payment

Payroll tax trust fund obligations receive the highest scrutiny because they carry personal liability for responsible parties under 26 U.S.C. § 6672. An MOR that shows accrued payroll tax liability with no corresponding payment is a red flag that triggers immediate inquiry.

Trustees verify that the debtor is making timely deposits of withheld income taxes, Social Security, and Medicare taxes. The MOR should show the gross payroll amount, the tax withholding, and the date of deposit. If the debtor is on a monthly deposit schedule, the trustee expects to see the prior month's deposit made by the 15th of the following month.

For a debtor that emerged from Chapter 11 with unpaid payroll taxes from the pre-petition period, the trustee checks whether the plan treats those taxes as priority claims and whether the debtor is making the required payments. An MOR that shows no payment toward pre-petition payroll tax liability while the debtor pays other expenses will trigger a UST objection.

The trustee also reviews whether the debtor is filing Form 941 on time. A missed filing is often the first sign of cash flow problems that will affect plan feasibility.

Line Item 5: 13-Week Cash Flow Feasibility vs. Plan Payment Projections

Trustees compare the debtor's 13-week cash flow forecast against actual results reported in each MOR. The purpose is to determine whether the debtor can generate sufficient cash to fund the plan over its term.⁴

The trustee looks for variance between projected and actual revenue. Revenue growth assumptions above a reasonable month-over-month increase require supporting documentation such as signed contracts or purchase orders. Expense reduction assumptions require a signed lease amendment or relocation agreement.

If the debtor reported a significant decline in revenue from one month to the next without explanation, the trustee will ask whether the business is seasonal or declining. The MOR should include a narrative explaining material variances.

The trustee also examines whether the debtor is using cash collateral without authorization. If the 13-week forecast shows negative cash flow in any week, the trustee expects to see a motion for cash collateral use or a stipulation with the secured creditor.

Exhibit A Negative Response Standards That Satisfy the Trustee

Trustees scrutinize MOR Exhibit A negative responses for insufficient detail, missing documentation, and cash flow inconsistencies.⁵ A negative response that simply says "No" without explanation does not satisfy the trustee's information needs.

For each negative response, the debtor should provide a brief narrative explaining why the item does not apply. For example, if the debtor answers "No" to whether it paid professional fees, the narrative should state: "No professional fees paid this period. All professionals have submitted fee applications pending court approval."

The trustee expects supporting documentation for any negative response that could be verified independently. If the debtor answers "No" to whether it made payments to insiders, the trustee may check bank statements to confirm. A negative response that contradicts bank records will damage the debtor's credibility.

The standard for Exhibit A is completeness and consistency. Each negative response should be consistent with the financial data reported elsewhere in the MOR. If the MOR shows a cash outflow but the Exhibit A shows no payments to any category, the trustee will flag the discrepancy.

Common MOR Errors That Delay Plan Confirmation and How to Prevent Them

Cash balance reconciliation errors account for a significant percentage of initial trustee objections. The fix is to reconcile each account separately before aggregating on the MOR.

Misclassified professional fees are another common error. Pre-petition and post-petition fees must be segregated on separate lines per Official Form 425C. A single line item for "professional fees" that mixes both periods will be rejected.

Missing bank statements are the third most common error. Trustees expect bank statements for all operating accounts within three business days of the MOR filing. Debtors should download statements on the first business day of each month.

Your Next Step

Review your current Subchapter V MOR template against the five line items above. If your template does not include separate account suffix matching, AR aging with collection rate footnotes, AP aging with priority classification, payroll tax trust fund tracking, and a 13-week variance narrative, update it before your next filing. For a template review or a second opinion on a pending MOR, contact [email protected].