Effective, successful representation of debtors and committees requires in-depth knowledge and specific legal skills. The Bankruptcy practice of Culhane Meadows includes lawyers with experience advising debtors and committees of creditors and equity holders in significant bankruptcy cases across the country, including in Dallas and New York. Our industry experience is equally broad, and includes matters involving for-profit corporations and not-for-profits in the many sectors.
Creditors’ committees play a key role in the administration of a Chapter 11 case and the formulation of a viable plan of reorganization. Because the interests of unsecured creditors are usually most at risk upon commencement of a Chapter 11 case, and in response to the concern that secured creditors traditionally have had an overwhelming voice in reorganization proceedings and thus a powerful role in determining the success or failure of a reorganization, Congress has deemed it important for unsecured creditors, particularly large ones, to play an active role in reorganizing the debtor. With this in mind, and to enable small secured creditors to have a voice through representatives having fiduciary duties to all unsecured creditors, Congress implemented a system of oversight by creditors’ committees.
The role of an official committee in a Chapter 11 case is one that, with administrative oversight of the U.S. Trustee, provides representation of an appropriate constituency for the benefit of the reorganization process. Toward that objective, a committee gathers information from its constituency and the debtor, and channels that information through the committee and its professionals to the court so that concerns of the constituency can be articulated by a representative group. Often, a committee participates in negotiation of a plan as well as the recommendation of acceptance or rejection of a proposed plan. Notably, committees are not formulated to provide a platform for a particular creditor. Instead, they are designed to enable investigation and provide a forum for negotiation on behalf of those claims or interests represented by the committees.
Congress clearly intended for committees to play a significant role in the administration of a Chapter 11 case and the formulation of a viable, consensual plan of reorganization. The Code and case law have given committees broad power to investigate the affairs of the debtor, participate in negotiating a plan, assist in the reorganization process, and initiate or participate in various proceedings. Nevertheless, service on a committee is fraught with potential conflicts for members and employed professionals alike. Such service may also be time consuming and ultimately unrewarding, particularly if the estate lacks sufficient assets to achieve a viable reorganization. Despite these drawbacks, active and responsible participation of a committee often offers the committee’s constituency its only hope for some recovery from the debtor’s bankruptcy estate. The committee gives constituents an important and influential voice in the reorganization process unavailable to individual constituents acting alone.