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

In a Chapter 11 bankruptcy, a creditor’s committee is appointed to represent the interests of creditors in the bankruptcy proceeding. The committee includes generally the seven largest unsecured creditors, as chosen by the United States Trustee. The committee works to ensure that the debtor-in-possession (the bankrupt company) is taking the necessary steps to maximize the value of the company and the return to creditors. The primary responsibility of the creditor’s committee is to review the management decisions, financial operations, and restructuring plans of the debtor-in-possession. They can also act as a bargaining agent for the creditors when negotiating with the debtor-in-possession. The committee has the right to hire professionals to protect the interests of the creditors and can act as a sounding board for either the debtor-in-possession or the creditors. The creditor’s committee is an important part of the Chapter 11 bankruptcy process in South Carolina, and as such, the committee is closely monitored by the United States Trustee. All members of the committee must be approved by the Trustee and must meet certain qualifications. For example, a committee member must be an experienced, qualified professional, such as an accountant, attorney, or financial expert. Ultimately, the creditor’s committee is there to serve the interests of the creditors and ensure that they receive the best possible return on their investments. They serve as a check and balance to ensure the debtor-in-possession is acting in the best interests of the creditors and not themselves.

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

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