If you are like most business owners struggling with debt, then your decision to file a Chapter 11 bankruptcy was likely driven by your desire to retain and reorganize your business in order to pay your creditors back over time. Yet the terms of your repayment are not yours alone to determine; you must also work with a creditors committee. It is important that you understand how a creditors committee is formed, and what role it will play in your bankruptcy case.
Once you have filed your petition with the bankruptcy court to get your case started, you will then be appointed either a bankruptcy administrator or a United States trustee. His or her role is to not only monitor your continued operation of the business, but also to meet with and appoint a committee of your creditors. According to chapter 11 section 1102 of the U.S. Bankruptcy Code, the members of this committee are expected to be an adequate representation of all of your creditors. Committee members are usually representatives of those companies who have the seven largest claims against you. If they so wish, those creditors may appoint an attorney as their representative.
The job of the creditors’ committees entails the following responsibilities:
- Manage the access the other creditors have to your information.
- Collect feedback from the all of the creditors in the group.
- Ensure that any reporting mandated by the court to the creditors is done.
In addition, your creditors’ committee as well as your U.S. trustee will together meet with you if concerns regarding your Chapter 11 case arise. In such a meeting, you are required, under oath, to answer any and all questions regarding your conduct and actions displayed while running the business.