What Are Creditors’ Committees in Chapter 11 Bankruptcy?
Is your business considering filing for Chapter 11 bankruptcy? Or are you an individual whose debts are too high to qualify for Chapter 13 bankruptcy, and thus you are considering a Chapter 11 bankruptcy filing? In either case, it is important to understand the role that creditors’ committees can play in Chapter 11 cases. Generally speaking, creditors’ committees are appointed to ensure that the business being run by the debtor in possession — i.e., the business that has filed for Chapter 11 bankruptcy — is being done properly and that funds are being properly managed. Creditors’ committees can have different components, and the US Bankruptcy Code allows creditors’ committees to have various powers and duties. Our West Palm Beach bankruptcy attorneys can explain in more detail.
Bankruptcy Code and Creditors’ Committees
Under the Bankruptcy Code, the US trustee in a Chapter 11 case “shall appoint a committee of creditors holding unsecured claims and may appoint additional committees of creditors or of equity security holders as the US trustee deems appropriate.” If it is necessary to “assure adequate representation of creditors or of equity security holders,” the US trustee can order additional creditors’ committees to be appointed. The US trustee also has the power to change the membership of the creditors’ committee to “ensure adequate representation of creditors or equity security holders.”
As the United States Courts underscores, creditors’ committees in Chapter 11 cases are typically made up of “unsecured creditors who hold the seven largest unsecured claims against the debtor.” It is important to know that creditors’ committees are not appointed in Subchapter V cases — only traditional Chapter 11 cases.
Powers and Duties of Creditors’ Committees
In a Chapter 11 case, creditors’ committees have various powers and duties, which are enumerated in the US Bankruptcy Code. Those powers and duties include but are not limited to the following:
- Consulting with the trustee or debtor in possession about the administration of the bankruptcy case;
- Investigating the debtor’s business and all related information in connection with the reorganization plan;
- Participating in the creation of the reorganization plan;
- Advising other creditors represented by the creditors’ committee about the reorganization plan; and
- Requesting the appointment of a trustee or examiner.
Contact Our West Palm Beach Bankruptcy Lawyer Today
Any business that is considering a Chapter 11 bankruptcy filing should work with an attorney to learn about the full bankruptcy process and to begin planning for reorganization. While every Chapter 11 case will have its own nuances, there are laws that govern Chapter 11 filings and that will be relevant to your case. It is important to learn about what is involved in a Chapter 11 case to work with one of the experienced West Palm Beach bankruptcy lawyers at Kelley, Fulton, Kaplan & Eller as soon as you decide to file. Whether you are planning for Chapter 11 as a business or an individual who does not qualify for Chapter 13 bankruptcy, our firm can help. Contact us today to learn more about the bankruptcy services we provide to businesses and individuals alike in South Florida.
Sources:
law.cornell.edu/uscode/text/11
uscourts.gov/court-programs/bankruptcy/bankruptcy-basics/chapter-11-bankruptcy-basics
