Video instructions and help with filling out and completing Why Form 843 Bankruptcy

Instructions and Help about Why Form 843 Bankruptcy

Welcome to the 5-minute legal master series where expert attorneys help you master important legal topics today board-certified creditors rights and business bankruptcy attorney Kirk B Berkeley discusses the unsecured creditors committee welcome and today we're going to be talking about unsecured creditors committees in bankruptcy proceedings so what is it unsecured creditors committee an unsecured creditors committee is a committee that is formed by the Office of United States trustee in most large chapter 11 bankruptcy cases and some of the smaller and mid-sized chapter 11 bankruptcy cases as well and the committee is chosen from the debtors largest unsecured creditors typically what happens is the beginning of the case the debtor will file its list of largest 20 unsecured creditors sometimes 30 to 50 largest unsecured creditors and then the office of United States trustee will go out and solicit those creditors to see if they want to participate on the creditors committee they'll then take those responses of creditors that are willing to serve participation is voluntary and form a committee of the three to seven largest creditors that want to participate and they usually try and mix up the creditors to participate maybe a few creditors that represent trade creditors maybe a couple bondholders to try and get some differing positions or views of the case on the committee the committee is then charged with representing the interest of all unsecured creditors not just those creditors on the committee and they are to look out for the interest of all unsecured creditors for a number of number of reasons one perhaps to try and get the largest recovery the largest financial recovery as possible sometimes maybe the committee is an ally of the debtor in helping the debtors stay alive and conducting business because then creditors have somebody to continue to sell to Congress decided that creating unsecured creditors committees and they mandated their their creation in Section 1102 of the Bankruptcy Code for a couple of key reasons number one most other constituencies in the bankruptcy case have a reason to participate and the reason to hire counsel to protect their interest obviously the data file bankruptcy and has an interest in selling its assets reorganizing its business and has paid professionals attorneys sometimes financial advisors to help it do that if there's a secured creditor a bank in the case they also have an incentive in getting paid and maybe getting their collateral back and also have financial advisors and attorneys and other professionals to help them do that maybe organized labor is participating but for most general unsecured creditors if they just were acting on their own and had to hire counsel to participate in the process many of them would not so Congress allows for these creditors to band together and form this committee and have significant influence in the case investigate the debtors financial affairs negotiate a plan what the payout to creditors will be investigate the bank's liens and claims and generally do an autopsy on the business to see where creditors can find something to make a return to unsecured creditors as a whole one of the biggest benefits of serving on unsecured creditors committee is that the committee gets to hire Council and its attorneys and other professionals are paid for by the debtor so again another way to incentivize creditors to participate Congress in essence thought that since the company's insolvent and since unsecured creditors sit right above equity in the priorities priority scheme that the true owners of the company the true owners of the equity are the unsecured creditors and therefore they should have power in the case and an incentive to participate and try and get the best possible return they can for their constituents and giving the the creditors this incentive and the ability to sit on a committee and hire professionals paid for by the debtor will allow them to do that sometimes participating on the creditors committee means the difference between some return or no return or a small return and a large return all that it requires is some time and if you participate on the committee I think that most creditors find it a worthwhile process and help their company recover the best amount possible you've just heard the five-minute legal mention where expert attorneys help you master important legal topics for more information on this and other topics please visit five minute legal master calm