Unsecured Creditors' Committees: Who serves and how critical needs in Chapter 11 cases are met

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With bankruptcy filings on the rise, an increasing number of businesses and individuals may find themselves listed as unsecured creditors with much to lose in a bankruptcy case. Large creditors (as defined by the amount of unsecured credit extended) may be solicited to serve on an unsecured creditors' committee formed after the commencement of a bankruptcy case. While a creditor owed significant money may consider any further time or effort to be a waste of resources, serving on a creditors' committee can present a valuable opportunity to be involved in a debtor's reorganization (or ultimate liquidation), and to ensure maximum recovery for all unsecured creditors. This article provides a brief overview of what a creditors' committee is, who may serve, what service entails, and some of the pros, cons, and other considerations involved.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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