How does a creditor’s committee work in a Chapter 11 bankruptcy?

In California, a creditor’s committee in a Chapter 11 bankruptcy is a grouping of creditors that are appointed by the United States Trustee to represent the interests of all unsecured creditors. A creditor’s committee can have between 3 and 7 members who are either appointed by the trustee or decided upon through voting by unsecured creditors. The creditor’s committee’s primary duty is to investigate and review the debtor’s financial condition and their dealings with creditors. The committee will also review possible plans of reorganization and advise creditors if the proposed plan will benefit them or not. It must be noted that they do not represent any individual creditor and are not involved in court proceedings. The creditor’s committee also has the power to approve or reject any proposed agreement or compromises between the debtor and a creditor. They can also acquire the right to sue parties on behalf of the debtor and other creditors in the Chapter 11 bankruptcy. Furthermore, the creditor’s committee is responsible for monitoring the debtor’s activities and progress to ensure that they are complying with the bankruptcy laws. The creditor’s committee’s ultimate goal is to ensure that the debtor pays back creditors as much as possible while also helping the debtor to restructure their business in a way that allows them to remain viable. If the debtor does not have the resources to pay back its creditors, then the committee will work to negotiate a fair settlement with the creditors or the court to ensure that the debt is resolved.

How does a creditor’s committee work in a Chapter 11 bankruptcy?

Related FAQs

Related Blog Posts