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Creditors & Equity Committees

In most chapter 11 bankruptcy cases, the Office of the United States Trustee appoints an official committees of unsecured creditors to act as a fiduciary  representative of all unsecured creditors as a group. In that capacity, the Committee enjoys automatic standing in all aspects of the chapter 11 case and holds a position of influence in the development of restructuring alternatives. If used correctly, that influence can lead to substantial improvements in recoveries to holders of general unsecured claims. The Committee also has the ability to investigate various causes of action and, if the debtor is unwilling or unable, to prosecute those actions on behalf of the debtor’s estate. The Committee hires lawyers and, at times, other professionals – at the expense of the bankruptcy estate and not the individual members of the Committee – to pursue the common goal of maximizing recoveries to the unsecured creditors. We recently established a benchmark, representing a Committee in negotiating and confirming a plan of reorganization providing a 100% recovery to unsecured creditors in a chapter 11 retail case.

When equity holders are also potentially “in the money” in a particular chapter 11 case, an official committee of equity holders may be appointed to serve the same role for the equity holders as the official committee of unsecured creditors serves for the general unsecured creditors.



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