Bankruptcy Creditor Committee Representation

In a Chapter 11 bankruptcy proceeding, it is the responsibility of the Creditors’ Committee to represent the interests of the unsecured creditors. The committee may undertake such actions as investigating the assets and liabilities of a debtor, consulting on the operations of the debtor’s business, negotiating with the debtor, and offering recommendations on proposed restructuring plans.

When a Chapter 11 case is filed, the United States Trustee’s Office will reach out to the unsecured creditors to gauge their interest in forming a Creditors’ Committee. The U.S. Trustee will decide whether a committee should be formed based on the number of responses it receives. In larger Chapter 11 cases, the committee often consists of the seven largest unsecured creditors, but that number may vary depending on such factors as the size of the outstanding debt, the number of creditors, and the creditors’ interest in participating.

Because some of the creditors in a Chapter 11 proceeding may not have experience with the bankruptcy process, the Creditors’ Committee is empowered to hire attorneys and other professionals for assistance. Any professionals hired by the committee are compensated by the bankruptcy estate.

The Creditors’ Committee is responsible for representing the general unsecured creditors and has a fiduciary duty to them. Since the interests of the unsecured creditors in a Chapter 11 case may be conflicting, it is the committee’s responsibility to balance their interests and avoid placing the interests of one creditor ahead of others in its class. While members of the committee enjoy qualified immunity from liability for their actions, they may be held personally liable for willful misconduct or actions outside of their authority.

The Creditors’ Committee consults directly with the debtor’s counsel on issues that relate to the administration of the bankruptcy case. The committee may also investigate the pre-petition actions and conduct of the debtor’s management team as well as pre-petition asset transfers. Finally, the committee plays a strong role in drafting the debtor’s Chapter 11 disclosure statement and reorganization plan.

At Thomas H. Curran Associates our bankruptcy lawyers bring a wealth of experience and knowledge to the quality representation of Creditors’ Committees, assisting them to effectively represent unsecured creditors in any Chapter 11 proceeding.