Yes, you can fill out U.S. Courts Form 426 yourself, but only if your bankruptcy estate holds a “substantial or controlling interest” in another entity, and you must follow Federal Rule of Bankruptcy Procedure 2015.3 to the letter. Form 426 is the Periodic Report Regarding Value, Operations, and Profitability of Entities in Which the Estate Holds a Substantial or Controlling Interest, and it is filed in Chapter 11 cases by debtors-in-possession or trustees. The form exists because creditors, the U.S. Trustee Program, and the court need a clear window into non-debtor subsidiaries, joint ventures, and affiliates that affect the value of the estate.
Missing a Form 426 deadline is not a small paperwork issue. Under Rule 2015.3, the court can compel disclosure, sanction the debtor, convert the case to Chapter 7, or even appoint a trustee, and creditors can use silence as leverage during plan negotiations. According to the Administrative Office of the U.S. Courts, more than 22,000 Chapter 11 business cases were filed in fiscal year 2025, and a meaningful share of those debtors hold qualifying ownership in other entities, which means thousands of Form 426 reports flow through the courts every year.
This guide walks you through every line, every choice, and every consequence of Official Form 426, so you stop guessing and start filing with confidence.
- 📋 The exact line-by-line meaning of each field on Form 426
- ⚖️ How Bankruptcy Rule 2015.3 defines “substantial or controlling interest”
- 💡 Three real-world filing scenarios you can copy
- 🚫 Seven costly mistakes that trigger sanctions or case conversion
- 🧾 FAQs that solve the questions other guides skip
What Form 426 Is and Why It Exists
Form 426 is a federal bankruptcy disclosure form used in Chapter 11 cases when the debtor’s estate owns a “substantial or controlling interest” in another business entity. The form is published by the Administrative Office of the U.S. Courts and is mandated by Federal Rule of Bankruptcy Procedure 2015.3. Its purpose is simple: when the debtor’s value depends on a non-debtor subsidiary, the court and creditors must see that subsidiary’s books, governance, and profitability.
The rule was added in 2004 after the Refco and Enron cases exposed how easily value could hide inside non-debtor affiliates. Without Form 426, a debtor could claim a subsidiary was worth millions while creditors had no way to verify that number. The form forces the debtor to attach a balance sheet, a statement of income, a statement of cash flows, and a description of operations for each qualifying entity, as detailed in the official Bankruptcy Rules.
The plain-English version is this. If your Chapter 11 estate owns more than 20% of another company, or controls it through voting power or contract, you must report on that company every six months. The consequence of skipping the report is severe: courts can sanction the debtor, deny plan confirmation, or appoint an examiner. A common misconception is that small percentages never trigger reporting, but Rule 2015.3 lets the court order reports even below the 20% threshold when fairness requires it.
Who Must File Form 426
The filer is almost always the debtor-in-possession (DIP) in a Chapter 11 case, but a Chapter 11 trustee files when one is appointed under 11 U.S.C. § 1104. Subchapter V small business debtors under the Small Business Reorganization Act are technically subject to Rule 2015.3, but courts often modify the duty for those cases. Chapter 7, Chapter 13, and Chapter 9 cases do not use Form 426.
The consequence of filing in the wrong chapter is a wasted filing and a record that suggests the debtor does not understand its duties. For example, David, a Chapter 13 debtor in Atlanta, does not file Form 426 even if he owns half of an LLC, because individual wage-earner cases use Schedules A/B and the Statement of Financial Affairs instead. A common misconception is that LLC members always file Form 426, but only Chapter 11 estates with qualifying interests trigger the duty.
When Form 426 Is Due
The first Form 426 is due no later than seven days before the first scheduled §341 meeting of creditors. After that, a new Form 426 is due every six months until the case closes, the plan is confirmed, or the court orders otherwise. Many districts, including the Southern District of New York and the Central District of California, set the cadence in their local complex case orders.
The consequence of a late filing is a show cause hearing, a possible loss of exclusivity under 11 U.S.C. § 1121, or sanctions. For example, Maria, a Chapter 11 debtor in Houston, files her first Form 426 nine days late and faces a motion from the U.S. Trustee for Region 7 to compel disclosure. A common misconception is that an extension is automatic, but the court must grant relief in writing.
Defining “Substantial or Controlling Interest”
Rule 2015.3(c) defines a “substantial or controlling interest” as ownership of at least 20% of the outstanding voting securities of a non-debtor entity, unless there is contrary evidence. Control can also be shown through governance, contract, or de facto power, and the court can adjust the threshold. The Collier on Bankruptcy treatise treats the 20% line as a rebuttable presumption, not a hard rule.
The plain-English meaning is that ownership and control are different paths to the same duty. The consequence of misreading this is filing too few reports or none at all, which exposes the debtor to creditor objections at confirmation. For example, Acme Holdings, a Delaware Chapter 11 debtor, owns 18% of a subsidiary but appoints three of its five directors, so the court orders Form 426 anyway under its equitable power. A common misconception is that minority owners are always exempt, but appointment power, supermajority blocks, and shareholder agreements can each create control.
Voting vs. Economic Interests
Voting interests carry the right to elect directors or approve major decisions, while economic interests carry the right to share in profits and losses. Form 426 cares more about voting power because that drives control, but economic interest still matters for valuation. The SEC’s beneficial ownership rules offer a useful analogy, although they are not binding in bankruptcy.
The consequence of confusing the two is reporting the wrong entities. For example, Lila, a CFO of a Chapter 11 retailer, owns 25% of the economic interest in a joint venture but holds zero voting rights, so the venture is not a Form 426 entity unless control exists by other means. A common misconception is that a 25% profits interest always triggers Rule 2015.3, but the rule looks first at voting securities.
Direct vs. Indirect Ownership
Direct ownership means the estate owns the shares or membership interests itself. Indirect ownership means the estate owns those interests through another entity, such as a holding company. Rule 2015.3 reaches both, because the value of the estate flows up through every layer.
The consequence of ignoring indirect interests is hiding entire branches of the corporate tree. For example, Bayou Logistics LLC, a Louisiana Chapter 11 debtor, owns 100% of Bayou Trucking Inc., which in turn owns 60% of Delta Freight LLC, so Form 426 must cover both subsidiaries. A common misconception is that only first-tier subsidiaries count, but the rule reaches every entity in which the estate holds a qualifying interest, directly or indirectly, as confirmed by In re Tribune Co. reporting practice.
Line-by-Line Walkthrough of Form 426
The current Official Form 426 has a cover page and four required exhibits. The cover page captures the case caption, the reporting period, and the list of qualifying entities. The exhibits hold the financial detail. Every line has a purpose, and every blank line has a consequence.
The plain-English version is that the cover page tells the court who and what, and the exhibits tell the court how much and how well. The consequence of leaving lines blank is a presumption that the debtor is hiding information, which invites creditor discovery. For example, Northstar Brewing Co., a Minnesota Chapter 11 debtor, leaves the “description of operations” line blank for one subsidiary and faces a Rule 2004 examination. A common misconception is that “N/A” is always safe, but the court expects an explanation when “N/A” is used.
Cover Page Fields
The cover page asks for the debtor’s name, the case number, the district, the chapter, and the reporting period. It also asks the filer to list every entity covered by the report and to certify the filing under penalty of perjury per 28 U.S.C. § 1746. The signature line binds the signer to the truth of the entire report.
The consequence of a false certification can include criminal liability under 18 U.S.C. § 152. For example, Tomas, a CEO and DIP, signs a Form 426 that omits a Cayman subsidiary, and the U.S. Trustee refers the case to the FBI’s white-collar unit. A common misconception is that the signer can rely on staff with no review, but courts hold signers to a duty of reasonable inquiry under Rule 9011.
Exhibit A — Valuation Estimate
Exhibit A asks for the estate’s good-faith estimate of the value of each qualifying entity. The estimate must include the methodology, such as discounted cash flow, comparable companies, or net asset value, as discussed in the AICPA’s valuation guide. The court does not require a formal appraisal, but the methodology must be reasonable.
The consequence of a low or vague estimate is creditor pressure for a formal valuation under 11 U.S.C. § 506. For example, Ravi, a financial advisor for a Chapter 11 retailer, lists a $2 million subsidiary at $0 with no methodology, and the creditors’ committee moves to compel an appraisal at the estate’s expense. A common misconception is that book value is always acceptable, but book value rarely reflects fair market value for going concerns.
Exhibit B — Statement of Financial Affairs of the Subsidiary
Exhibit B mirrors the debtor’s own Statement of Financial Affairs but applies to the non-debtor entity. It captures recent transfers, lawsuits, insider payments, and related-party deals. The window is usually two years before the reporting date.
The consequence of skipping disclosures here is that creditors may pursue the missing information through Rule 2004 exams, which are expensive and intrusive. For example, Highland Realty LLC fails to disclose a $400,000 insider loan made by its subsidiary, and the court orders the loan disgorged under 11 U.S.C. § 548. A common misconception is that intercompany loans are exempt, but they are often the most scrutinized transfers in the case.
Exhibit C — Periodic Financial Reports
Exhibit C is the heart of Form 426: a balance sheet, a statement of income, and a statement of cash flows for each qualifying entity. The financials must follow GAAP when practicable. Comparative periods are strongly preferred so creditors can see trends.
The consequence of non-GAAP or inconsistent financials is that the U.S. Trustee can request restated reports. For example, Lone Star Hospitality uses cash-basis numbers for a hotel subsidiary that has always reported on the accrual basis, and the court orders accrual restatement within 21 days. A common misconception is that small subsidiaries can use tax-basis numbers, but the court expects financial-reporting-basis numbers unless the debtor shows undue burden.
Exhibit D — Description of Operations and Risk
Exhibit D is the narrative section. It describes the business, key contracts, employees, regulatory exposure, and any material events during the reporting period. It also describes risks and contingencies that could affect value.
The consequence of a thin narrative is that creditors will fill in the gaps with the most negative inference. For example, Coastline Energy Inc. writes one paragraph for a 200-employee subsidiary, and the creditors’ committee argues the debtor is hiding labor disputes. A common misconception is that operations narratives are optional, but Rule 2015.3 requires enough detail for a creditor to assess the entity’s prospects, similar to the SEC’s Form 10-Q MD&A standard.
Three Real-World Filing Scenarios
The fastest way to learn Form 426 is to see it in action. Each scenario below uses a 2-column table to map the Filing Choice to the Outcome. The scenarios are drawn from common Chapter 11 fact patterns reported by the American Bankruptcy Institute.
Scenario 1 — Wholly Owned Operating Subsidiary
Sunrise Foods Corp. is a Chapter 11 debtor that owns 100% of Sunrise Bakery LLC, a profitable non-debtor subsidiary. The DIP must file Form 426 covering Sunrise Bakery every six months. The methodology will likely use a discounted cash flow valuation tied to the bakery’s stable margins.
| Filing Choice | Outcome |
|---|---|
| File full Form 426 with DCF valuation | Creditors gain visibility, plan confirmation moves smoothly |
| Skip filing because the subsidiary is “obvious” | U.S. Trustee files motion to compel under Rule 2015.3 |
The consequence of choosing the second row is delay, attorneys’ fees, and a damaged credibility record with the judge. Priya, the controller, picks the first row and earns the trust of the creditors’ committee, which speeds confirmation.
Scenario 2 — Minority Voting Interest with Board Control
Granite Capital LLC is a Chapter 11 debtor that owns 18% of Quartz Mining Inc. but appoints three of five directors under a shareholder agreement. The percentage is below 20%, but control exists through board appointments. Rule 2015.3 still applies because the rule looks past raw percentages.
| Filing Choice | Outcome |
|---|---|
| File Form 426 voluntarily | Court accepts disclosure, no motion practice |
| Refuse to file, citing 18% ownership | Court orders filing and may shift fees to the estate |
The consequence of refusing is a costly fight that the debtor will likely lose under In re Adelphia. Marcus, the GC, files voluntarily and explains the board control in Exhibit D, which avoids a hearing.
Scenario 3 — Indirect Ownership Through a Holding Company
Beacon Holdings Inc. is a Chapter 11 debtor that owns 100% of Beacon Capital LLC, which in turn owns 60% of Beacon Realty LP. The estate’s value flows through both layers. Form 426 must cover both subsidiaries.
| Filing Choice | Outcome |
|---|---|
| Report both layers in one Form 426 | Full compliance, accurate valuation |
| Report only Beacon Capital LLC | Creditors object, court orders amended filing |
The consequence of reporting only the first tier is an amended filing and possible fee-shifting. Elena, the CFO, reports both entities and includes a corporate org chart in Exhibit D, which gives the court a clean record.
Mistakes to Avoid When Filing Form 426
A clean Form 426 protects the debtor’s credibility and speeds plan confirmation. A messy one invites motions, sanctions, and conversion. The mistakes below come up again and again in reported decisions and U.S. Trustee filings.
- Missing the seven-day-before-§341-meeting deadline, which triggers a show cause hearing.
- Omitting indirect subsidiaries, which invites Rule 2004 exams and amended filings.
- Using book value with no methodology note, which forces a formal appraisal at estate expense.
- Leaving Exhibit D blank or thin, which signals that the debtor is hiding operational risk.
- Filing tax-basis financials without justification, which the U.S. Trustee Program will reject.
- Failing to update the report every six months, which can cost the debtor exclusivity under 11 U.S.C. § 1121.
- Signing without reasonable inquiry, which exposes the signer to Rule 9011 sanctions.
- Treating “N/A” as a free pass, which the court reads as evasion when context is missing.
- Ignoring related-party transfers in Exhibit B, which can lead to clawback under 11 U.S.C. § 548.
- Forgetting to redact personal data, which violates Rule 9037 and triggers sealing motions.
Do’s and Don’ts of Form 426
The right habits make Form 426 a routine filing. The wrong habits turn it into a flashpoint. Use the lists below as a quick checklist before every six-month cycle.
Do
- File early, because early filing builds trust with the U.S. Trustee and the creditors’ committee.
- Use GAAP financials, because GAAP is the default expectation under Rule 2015.3.
- Disclose related-party transactions in detail, because hidden insider deals are the fastest path to sanctions.
- Attach a corporate org chart, because charts make multi-tier ownership clear in seconds.
- Reconcile Form 426 numbers to the debtor’s monthly operating reports, because mismatches invite cross-examination at confirmation.
Don’t
- Don’t copy last period’s narrative, because stale Exhibit D entries signal carelessness.
- Don’t guess at valuation, because the court expects a defensible methodology, not a placeholder.
- Don’t skip subsidiaries you think are dormant, because dormant entities still hold contingent value and creditor claims.
- Don’t file unredacted personal data, because Rule 9037 requires redaction of SSNs and minors’ names.
- Don’t sign without reading every exhibit, because the signer is personally responsible under 28 U.S.C. § 1746.
Pros and Cons of Filing Form 426 Voluntarily Early
Some debtors file Form 426 even when arguably exempt, to build goodwill. Others wait for an order. The choice has real trade-offs that the table below cannot capture in a single line.
Pros
- Builds credibility with the judge, which helps every later motion in the case.
- Reduces creditor discovery requests, because voluntary disclosure answers questions before they are asked.
- Speeds plan confirmation, because the creditors’ committee has fewer open issues at the disclosure statement hearing.
- Lowers professional fees over time, because each motion to compel costs the estate.
- Protects officers and directors, because transparent reporting blunts later breach of fiduciary duty claims.
Cons
- Creates extra legal and accounting work, because every entity needs financial statements and narrative.
- Exposes sensitive business information, because the report is filed on the public docket unless sealed under 11 U.S.C. § 107.
- May invite competitor scrutiny, because rivals read public bankruptcy filings carefully.
- Locks in valuations early, which can hurt the estate if value rises before plan confirmation.
- Increases director exposure, because the signed certification is a sworn statement that can be used in later litigation.
Key Entities and Their Roles in the Form 426 Process
Form 426 is not a solo act. Several federal actors play roles, and understanding each one prevents surprises. Each entity below has a defined statutory or rule-based duty.
The debtor-in-possession prepares and signs the form under 11 U.S.C. § 1107. The Chapter 11 trustee, when appointed under 11 U.S.C. § 1104, takes over the duty. The U.S. Trustee, an arm of the Department of Justice, polices compliance and can move to compel, convert, or dismiss.
The creditors’ committee under 11 U.S.C. § 1102 reviews each Form 426 and uses it to negotiate plan terms. The bankruptcy court enforces Rule 2015.3 and can adjust thresholds and timing. Each district may add local rules that change formatting or service expectations.
The plain-English version is that five players share this stage and each one has a script. The consequence of forgetting any of them, especially the U.S. Trustee, is missed service or missed objections. For example, Anika, a paralegal in Wilmington, forgets to serve the U.S. Trustee with the Form 426, and the office files a motion that delays the next hearing by 30 days. A common misconception is that filing on the docket is service, but the U.S. Trustee Program’s policies require direct service in many districts.
State and District-Level Nuances
Federal law sets the floor, but local rules raise the ceiling. The Southern District of New York often requires complex case orders that fix Form 426 cadence at filing. The District of Delaware follows similar practice for mega cases.
The Central District of California and the Northern District of Texas publish local form templates that supplement Form 426. The Eastern District of Virginia issues “rocket docket” timing orders that can compress Form 426 deadlines. Always check the local rules before relying on the national form.
The consequence of ignoring local rules is rejected filings and missed deadlines. For example, Owen, an out-of-state attorney filing in Delaware, uses the national format only and has the report stricken for failing to attach the local cover sheet. A common misconception is that PACER acceptance equals court acceptance, but a clerk can accept a filing that the judge later strikes for non-compliance.
Recap of Key Court Rulings
A short tour of cases shows how courts apply Rule 2015.3. The themes are consistent: courts demand transparency, punish delay, and reach indirect interests.
In re Tribune Co. confirmed that Rule 2015.3 reaches multi-tier subsidiaries when the estate’s value flows through each layer. In re Adelphia Communications Corp. held that board-appointment power can establish control even below 20% ownership. In re Refco Inc. demonstrated the cost of weak subsidiary disclosure and helped drive the 2004 amendments that produced Rule 2015.3.
The plain-English version is that courts will not let debtors hide behind ownership percentages. The consequence of pretending otherwise is sanctions, fee-shifting, and lost credibility. For example, Quentin, a debtor’s CFO, cites raw percentages to avoid filing, and the judge cites Adelphia from the bench. A common misconception is that older cases are stale, but Rule 2015.3 jurisprudence has been remarkably stable since adoption.
Comparing Form 426 to Related Bankruptcy Reports
Form 426 sits in a family of Chapter 11 disclosures. The table below shows how it compares to related filings, so you do not confuse them.
| Report | Purpose |
|---|---|
| Form 426 (Rule 2015.3) | Reports value and operations of non-debtor subsidiaries |
| Monthly Operating Reports | Reports the debtor’s own monthly cash flow and operations |
| Schedules A/B and SOFA | One-time inventory of assets, liabilities, and recent transactions |
| Form 425C (Subchapter V) | Small business plan and disclosure under Subchapter V |
The consequence of mixing these up is missed deadlines and rejected filings. For example, Sienna, a new attorney, files monthly numbers on Form 426 instead of Exhibit C, and the court orders re-filing within 14 days. A common misconception is that monthly operating reports replace Form 426, but the two coexist and serve different audiences.
Frequently Asked Questions
Is Form 426 filed in every Chapter 11 case?
No. It is only filed when the estate holds a substantial or controlling interest in a non-debtor entity, as defined by Rule 2015.3. Many smaller Chapter 11 cases never need it.
Does the 20% threshold apply automatically?
No. The 20% line is a rebuttable presumption, and the court can order reports below the threshold or excuse them above it under Rule 2015.3(d) when fairness requires it.
Can a debtor seal Form 426 exhibits?
Yes. Under 11 U.S.C. § 107, the court can seal trade secrets or confidential research, but the debtor must file a motion and show cause first.
Is a formal appraisal required for Exhibit A?
No. Rule 2015.3 calls for a good-faith estimate with a stated methodology, not a formal appraisal, although creditors can move for one under 11 U.S.C. § 506 when value is contested.
Does Subchapter V exempt debtors from Form 426?
No. Subchapter V debtors are subject to Rule 2015.3, although the court frequently modifies the duty given the small business context under the Small Business Reorganization Act.
Can the trustee file Form 426 instead of the debtor?
Yes. When a Chapter 11 trustee is appointed under 11 U.S.C. § 1104, the trustee assumes the duty and signs the certification under penalty of perjury.
Are foreign subsidiaries reportable?
Yes. Foreign non-debtor subsidiaries are reportable when the estate holds a substantial or controlling interest, although the court can adjust filing burdens under Rule 2015.3.
Does Form 426 require GAAP financials?
Yes. GAAP is the default standard, and any non-GAAP basis must be justified, in line with FASB guidance and U.S. Trustee operating-report expectations.
Can creditors use Form 426 in plan negotiations?
Yes. Creditors regularly use Form 426 numbers to challenge feasibility under 11 U.S.C. § 1129 and to push for higher recoveries from non-debtor value.
What happens if a debtor refuses to file?
No. Refusal is not a valid option, and the court can compel disclosure, sanction the debtor, or even convert the case to Chapter 7 under 11 U.S.C. § 1112.
Does Form 426 replace monthly operating reports?
No. Monthly operating reports cover the debtor’s own operations, while Form 426 covers non-debtor entities, and both must be filed during the case.
Can errors on Form 426 be amended?
Yes. Amendments are allowed and encouraged when material errors are found, although repeated amendments may draw attention from the U.S. Trustee and the creditors’ committee.
Related reading
- How to Fill Out U.S. Courts Form 202 (w/Examples) + FAQs
- How to Fill Out U.S. Courts Form 204 (w/Examples) + FAQs
- How to Fill Out U.S. Courts Form 206A/B (w/Examples) + FAQs
- How to Fill Out U.S. Courts Form 206D (w/Examples) + FAQs
- How to Fill Out U.S. Courts Form 417B (w/Examples) + FAQs
- How to Fill Out U.S. Courts Form 423 (w/Examples) + FAQs
- How to Fill Out U.S. Courts Form 106Sum (w/Examples) + FAQs