Unsecured Creditor Committees in Chapter 7

During bankruptcy, creditors’ committees play a crucial role. They help to guide the debtor through the process, negotiate on behalf of the creditors, and can even have a hand in the conversion to a Chapter 7 liquidation. Read more : https://www.scura.com/blog/can-secured-creditors-constitute-an-official-committee-of-unsecured-creditors

Official Committee of Unsecured Creditors

Typically, creditors’ committees consist of representatives from the various unsecured creditors in a case. They are appointed by the United States Trustee. Creditors are asked to fill out a questionnaire indicating their interest in serving on a committee.

The US Trustee is charged with determining the number of representatives, as well as the best way to select them. It is important to note that not all creditors are eligible. Some creditors may be excluded, such as governmental units.

The Creditors’ Committee can be made up of up to seven members who hold the largest unsecured claims in the case. Each member has a fiduciary responsibility to represent the interests of the unsecured creditors. The Creditors’ Committee can also hire professionals to assist them with their duties. These professionals are typically paid for their services from the debtor’s estate.

The Creditors’ Committee has other duties, such as assessing the debtor’s solvency and monitoring the debtor’s management of the case. They can also help to formulate a plan to reorganize the debtor’s business. They can even be retained to investigate the debtor’s activities.

The ad hoc committee may be less formal than an official unsecured creditor committee, but it still plays an important role in the debtor’s reorganization plan. It can be made up of any number of stakeholders, and can offer valuable insight to the debtor.