Official Form 425C: A Working Guide to the Subchapter V Monthly Operating Report

What Form 425C is, and who files it

Form 425C, "Monthly Operating Report for Small Business Under Chapter 11," is the Official Form that small business debtors and Subchapter V debtors use to satisfy the periodic reporting duty in 11 U.S.C. § 308.¹ Section 1187 applies that duty to Subchapter V debtors, and Bankruptcy Rule 2015(a)(6) directs that the report be filed on Form 425C for each calendar month after the order for relief.^{2 3}

Every other chapter 11 debtor files a different document: UST Form 11-MOR, the uniform report the U.S. Trustee Program adopted in 2021 under 28 C.F.R. § 58.8.⁴ The two forms ask for different things in a different order, so the first question in any case is which one applies. If the debtor elected Subchapter V or is a small business debtor under § 101(51D), it is Form 425C.

The form is signed under penalty of perjury by the responsible party. That signature is why the mechanics below matter: the numbers are the debtor's sworn statement of what happened that month.

When it is due

Rule 2015(a)(6) states the default: each report must be filed within 21 days after the last day of the month following the month the report covers.² Two adjustments apply to the first report. If the order for relief falls within the first 15 days of a month, a report is due for the rest of that month. If it falls after the 15th, that partial month is folded into the next month's report.² The duty ends when the plan becomes effective or the case is converted or dismissed.

The rule yields to the court, which may set a different schedule for cause, and in practice local rules and the U.S. Trustee's regional operating guidelines set an earlier date than the rule's default. The Eastern District of New York requires monthly reports by the 20th day of the following month under its Local Bankruptcy Rule 2015-1; the Northern District of California requires them by the 21st day of the following month under B.L.R. 2015-2.^{5 6} Calendar whichever date is earliest among the rule, the local rule, the regional guidelines, and any order in the case.

The anatomy of the form

The 12/17 version of the form runs four pages and 42 numbered lines, grouped into eight parts.¹

Part 1: the questionnaire

Lines 1 through 9 ask whether the business operated all month, whether it will operate next month, and whether bills, payroll, taxes, government filings, quarterly U.S. Trustee fees, and insurance premiums were paid on time, and whether all receipts went into the debtor-in-possession accounts. A "No" to any of them requires an explanation attached as Exhibit A.¹

Lines 10 through 18 ask the opposite kind of question: bank accounts other than the DIP accounts, sales of assets other than inventory, transfers or services to related parties, cancelled insurance, unusual expenses, borrowing or payments made on the debtor's behalf, new investment, payment of pre-petition bills, and pre-petition checks allowed to clear. A "Yes" to any of them requires an explanation attached as Exhibit B.¹

The questionnaire is where the U.S. Trustee's analyst starts. A "Yes" on line 17 or 18 without an Exhibit B is the fastest route to a phone call.

Part 2: the cash summary

Line 19 is the opening balance of all accounts, and the form says it "must equal what you reported as the cash on hand at the end of the month in the previous month." On the first report it is cash on hand as of the petition date.¹

Line 20 is total cash receipts, supported by Exhibit C, a listing of every dollar received whether or not it was deposited, including collections, card deposits, loans, and payments made by others on the debtor's behalf. Line 21 is total cash disbursements, supported by Exhibit D, a listing of every payment with date, payee, purpose, and amount, including debit card transactions, checks issued but not yet cleared, and pre-petition checks that were allowed to clear this month. The form is explicit on both lines: do not attach bank statements in lieu of the exhibit.¹

Line 22 is net cash flow, line 20 less line 21. Line 23 is cash on hand at the end of the month, line 19 plus line 22, and it becomes next month's line 19. The form itself notes that this figure "may not match your bank account balance" because of outstanding checks and deposits in transit.¹ That sentence is the form telling you to keep the report on a book basis and to reconcile to the bank separately.

Parts 3 through 6

Line 24 reports total post-petition payables, supported by Exhibit E, which lists each unpaid debt with the date incurred, the creditor, the purpose, and the due date. Line 25 reports total receivables, both pre- and post-petition, supported by Exhibit F, which lists who owes the money, how much, and when it is due.¹

Lines 26 and 27 report the number of employees when the case was filed and at the date of the report. Lines 28 through 31 report professional fees: bankruptcy-related fees paid this month and since filing, and other professional fees paid this month and since filing.¹ The cumulative lines are the ones that get compared across reports, so they must be carried forward from the prior month, not recomputed from memory.

Part 7: projections

Part 7 puts last month's projection next to what actually happened. Column A copies lines 35 through 37 from the previous report; column B copies lines 20 through 22 of this report; column C is the difference. Lines 35 through 37 then state next month's projected receipts, disbursements, and net cash flow.¹ The form notes that the first month's projected figures should match those provided at the initial debtor interview, if any.

This is the part that connects the monthly report to the 13-week cash flow forecast. If the debtor keeps a rolling forecast, lines 35 through 37 are the next four to five weeks of it, and column C is the variance the forecast should already have explained.

Part 8: attachments

Lines 38 through 42 are checkboxes for documents to attach if available: bank statements for each open account with account numbers redacted to the last four digits, bank reconciliation reports for each account, an income statement and balance sheet, budgets or forecasts, and job-cost or work-in-progress reports.¹ Regional U.S. Trustee guidelines usually turn some of these from "if available" into "required." The bank reconciliation on line 39 is the document that makes line 23 defensible.

Where reports go wrong

The errors that draw objections are mechanical, and they repeat.

Line 19 does not equal last month's line 23. Someone re-keyed the opening balance from a bank statement instead of carrying forward the prior report. The form prohibits this in so many words. Fix the chain and re-file if a prior report was wrong.

Line 23 was forced to the bank balance. The preparer "corrected" cash on hand to match the statement, which silently drops outstanding checks and deposits in transit from the cash activity. Keep line 23 on a book basis and attach the reconciliation on line 39.

Exhibit D omits pre-petition checks that cleared. The form requires those checks to be listed in disbursements and requires a "Yes" on line 18 with an Exhibit B explanation. Omitting them understates disbursements and answers line 18 incorrectly.

Exhibit C lists deposits instead of receipts. The exhibit is a listing of cash received, whether or not deposited, and the form says not to substitute bank statements. A deposit listing misses cash on hand and card settlements in transit.

Cumulative professional fees reset. Lines 29 and 31 are since-filing totals. When a new preparer starts from the current month, the cumulative figures drop, and the U.S. Trustee's comparison across reports breaks.

Part 7 is left blank or filled from the wrong report. Column A must be last month's lines 35 through 37. A blank Part 7, or a projection that changes retroactively to match actuals, reads as though the debtor is not managing to a forecast.

Questionnaire answers with no exhibit. Every "No" on lines 1 through 9 needs Exhibit A; every "Yes" on lines 10 through 18 needs Exhibit B. Unexplained answers are the most common reason for an information request.

Running the report from the 13-week forecast

The clean way to produce Form 425C is not to prepare it as a stand-alone document at all. If the debtor maintains a 13-week cash flow forecast reconciled weekly to the bank, the month's receipts and disbursements are already categorized, the variance against the prior projection is already explained, and next month's projection is already written. Part 2 and Part 7 fall out of the forecast; Exhibits C and D are the forecast's supporting detail sorted by date; line 39 is the reconciliation the forecast was already tied to.

That is also what the U.S. Trustee and the Subchapter V trustee are looking for across a series of reports: a debtor whose projections come true within an explained margin. A report that ties, month after month, is the quiet evidence of feasibility that the plan will later rely on.

Your next step

Pull the debtor's last three Form 425C filings and check three lines: does each line 19 equal the prior line 23, is there a line 39 reconciliation behind each line 23, and does every "Yes" on lines 10 through 18 have an Exhibit B. If the chain is broken, the fix is to correct the earliest wrong report and re-file forward. If you want a second set of eyes on the package, contact us.