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  1. Bankruptcy Glossary
  2. Creditors Committee

What is a Creditors Committee?

The Creditors' Committee is generally comprised of three to eleven creditors who are the largest unsecured lenders. The goal of the Creditors' Committee is to represent the unsecured creditors and their interests in the negotiation process before the Bankruptcy Court.

If necessary the Creditors' Committee can hire all the necessary professionals to assist with the bankruptcy reorganization process including: appraisers, legal counsel and accountants. The debtor's estate is responsible for covering the cost of the hires.

After the Creditors' Committee is selected the committee may 1) ask the court about the administration of the estate 2) make recommendations to the trustee for the administration of the estate 3) approve or deny the organization's confirmation plan which the debtor has submitted for approval.

The Creditors' Committee's decisions must be in the best interest of all unsecured creditors. The main goal of the Creditors' Committee is to assist the debtor to create a reorganization repayment schedule which is fair and equitable to all the creditors and will specifically outline the method the debtor will use to repay creditors, sell their assets and modify contracts or leases. After the completion of the plan, the Creditors' Committee will generally argue for the ratification of the debt repayment plan.

Under certain circumstances the Creditors' Committee may be allowed to create their own reorganization plan or, if advised to do so by their advisors, the Creditors' Committee may reject the reorganization plan proposed by the debtor.