Page 9 - US Bankruptcy Code Overview

- Debtor may continue relationship with a creditor, and pay for post-petition goods/services as administrative costs, or end relationship and/or reject contracts and leases as part of business judgment.
Creditors Committee
- U.S. Trustee may appoint a committee of creditors holding unsecured claims and may appoint additional committees of creditors or equity security holders. Upon a party’s motion, the court may order the U.S. Trustee to change the membership of a committee as necessary to ensure adequate representation. See 11 U.S.C. § 1102(a).
- Creditors’ committee usually consists of persons, willing to serve, holding 7 largest claims committee may be larger and may be chosen on basis of different types of claims as opposed to size of claims. See 11 U.S.C. § 1102(b)(1), (b)(2).
- Creditors’ committee has new duties to provide access to information to the class of creditors it represents. See 11 U.S.C. § 1102(b)(3).
- Committee may employ attorneys, accountants and other professionals. See 11 U.S.C. § 1103(a). Such expenses are paid by the debtor’s estate to the extent approved by the court.
- Committee consults with debtor on administration of case, investigates acts, conduct, assets, liabilities and financial condition of debtor, operation of debtor’s business and desirability of reorganization in connection with the formulation of the plan, and feasibility of any proposed plan. See 11 U.S.C. § 1103(c).
- Pros and cons of serving on a committee: committee acts as fiduciary for all other unsecured creditors - investment of time and expenditure of resources vs. heightened level of information and control.
First Day Applications
- Debtors will usually make certain motions and file certain applications with the court simultaneously with the filing of its petition.
• applications for employment of attorneys, financial advisors and other professionals;
• limitations on debt trading;
• motions for interim and final approval of DIP financing;
• motions to continue with utilities and other critical vendors and to make adequate assurances;
• motions to continue use of existing business forms and accounts;
• motions to pay non-extraordinary pre-petition employee wages, and to approve non-ordinary course retention packages to “key employees;” and
• motions to pay “critical vendors.”
> DEADLINES
Reclamation claims. See 11 U.S.C. § 546(c); U.C.C. § 2-702.
- A seller of goods who sold goods to the debtor in the ordinary course of business, which the debtor received within 45 days before commencement of the bankruptcy, may reclaim such goods, if:
• demand for return of goods is made within 45 days after the debtor receives them, or
• 45 days expires after commencement of the bankruptcy, demand for return of goods is made within 20 days after commencement of the case.
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