What is a creditor’s committee in a Chapter 11 bankruptcy?

A creditor’s committee in a Chapter 11 bankruptcy is a group of unsecured creditors appointed by the court to protect their interests in the bankruptcy proceeding. The committee serves to represent the interests of all creditors in the bankruptcy and can present proposals, negotiate with the debtor, and participate in litigation relating to the bankruptcy. The committee also works to investigate the facts leading to the bankruptcy, review the debtor’s plan of reorganization, and recommend any changes to the plan. Chapter 11 bankruptcy is a form of restructuring and reorganization, which generally allow businesses to remain in operation while they pay off their debts. Creditor’s committees are formed a few months after the filing of the bankruptcy, when the U.S. trustee appoints several unsecured creditors to form the committee. The committee typically includes at least three people who represent different types of creditors including trade creditors, lenders, and vendors. The creditor’s committee works to ensure that the debtor’s proposed reorganization is fair to all creditors and that the debtor is following the law. The committee is also responsible for negotiating with the debtor to ensure that any changes to the proposed reorganization are in the interest of all creditors. The committee generally has the right to hire an attorney and accountant to assist them in their duties. Serving on the creditor’s committee can be a difficult task as it often involves researching, questioning, and negotiating with the debtor.

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What is a creditor’s committee in a Chapter 11 bankruptcy?

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