If you’re thinking about filing for business bankruptcy or are a creditor in a litigant’s case, you’re probably wondering how the process is and how creditors will be affected. Creditors are an important part of the bankruptcy process, and in Chapter 11 bankruptcies, they’re represented by a creditors’ committee.
Who are creditor committees in chapter 11 bankruptcy?
In this form of bankruptcy, The United States Trustee (a Department of Justice official) appoints a group of creditors to represent the interests of all creditors in the bankruptcy. This is different from Chapter 13 bankruptcies, where there is only one trustee.
The creditors’ committee is made up of representatives of the business’s unsecured creditors. They work with the business’s debtor-in-possession (DIP) to oversee the business’s operations during bankruptcy.
What does a creditors’ committee do in Chapter 11 bankruptcy?
One of the main things a creditors’ committee does is negotiate with the business’s debtor-in-possession to come up with a plan for repaying creditors. This plan must be approved by the bankruptcy court.
Another main role is to investigate the business’s financial affairs and make sure that the DIP is running the business properly. They also have the power to approve or reject the business’s plans for reorganization. This means, for instance, that if the business wants to sell off assets, the creditors’ committee must agree to it.
Finally, the creditors’ committee can hire its own professionals, like business bankruptcy lawyers or accountants, to help it carry out its duties.
What are the benefits of having a creditors’ committee?
There are several benefits to having a creditors’ committee. First, it gives creditors a voice in the bankruptcy process. Second, it helps make sure that the business’s DIP is doing their job properly. And third, it can help speed up the bankruptcy process by negotiating with the business’s DIP on behalf of all creditors.
If you’re thinking about filing for business bankruptcy or are a creditor in a Chapter 11 bankruptcy case, it’s important to understand the role that creditors’ committees play in the process. Clearly, these committees are important to the business bankruptcy process and can be very beneficial to creditors.