Membership in the creditors' committee is the most effective way for individual creditors to influence the outcome of a bankruptcy case for the least expense.
Creditors' committees are appointed by the United States Trustee at the initial meeting of creditors held in the bankruptcy case. Ordinarily the members will include a few of the largest unsecured creditors.
The official creditors' committee is an important player in the Chapter 11 bankruptcy process. The Committee functions as a watchdog over the debtor, negotiator with secured creditors and a major participant in the plan confirmation process. The Committee has the right to voice an opinion on any issue in a Chapter 11 case.
A committee may consult with the debtor and make recommendations concerning the debtor's business but generally does not try to control the debtor's operations.
The Committee is entitled to hire counsel and any other professionals it deems appropriate. All professionals must be approved by the bankruptcy court, and, once approved; their fees are paid by the debtor from its assets. The ability to hire counsel whose fees are paid by the debtor is a great advantage to the Committee. It ensures proper representation of the creditors and often promotes cooperation by the debtor.
It is wise at the outset of a Chapter 11 case for the Committee to arrange a consultation with a lawyer who has significant experience in representing creditors' committees to get his or her recommendations regarding what course of action the committee should take and what assistance counsel may offer.
Our Strength and Unity
Our Strength and Unity
