Page 24 - Bankruptcy Volume 1

Creditors

Creditors comprise the pool of individuals, companies, or other entities that have claims against the
debtor or its assets. Importantly, claims against the pre-filing entity do not automatically carry over post
filing. Upon the expiration of a claims bar date that has been ordered and properly noticed, only those
creditors that (a) filed a claim in a timely manner against the debtor or (b) own a claim included by the
debtor in its schedules as a liquidated, noncontingent, undisputed obligation will retain active claims. All
other prepetition creditors, regardless of the validity of their claim, will be barred from seeking to recov-
er on that claim, absent further order of the court.

Committees

The Bankruptcy Code provides that the U.S. Trustee is to appoint a committee from creditors among the
20 largest unsecured creditors in a Chapter 11 case (the Unsecured Creditors Committee or UCC). Sec-
tion 1102(b) of the Bankruptcy Code provides that the UCC ordinarily consists of the seven largest un-
secured creditors willing to serve. By the use of the word ordinarily, the Code gives the U.S. Trustee the
power to vary the actual number or composition of the UCC to provide adequate representation. Credi-
tors’ committees are appointed under Chapter 11 but may also function informally or as an official
committee elected by the creditors following conversion to Chapter 7. When functioning officially in a
Chapter 11 case, the UCC is permitted to retain advisers and those advisers are paid out of the assets of
the debtors’ estate.

In addition to the UCC, the Bankruptcy Code allows for the formation of additional committees to rep-
resent the interests of other creditors, either secured or unsecured, and equity holders. The primary rea-
son for the formation of additional committees is to provide an official body to represent the interests of
like creditors. These committees are particularly useful if the position of the official unsecured creditors’
committee may conflict with the other creditors. For example, a matter involving the bankruptcy of a
large franchise operation may also designate a committee to represent the claims of the franchise own-
ers. Another committee might form to represent the secured creditors or equity holders as well. Yet an-
other committee might form to represent the interests of retirees of a company with substantial numbers
of such persons who have vested benefits. Because of the additional administrative expenses incurred
with multiple committees, a number of courts will not approve the appointment of committees of credi-
tors other than the UCC. Alternatively, if other committees are appointed, the court may place a cap on
the professional fees allowed or the committees may have to pay their own professional fees.

Patient Care Ombudsman

In 2005, the Bankruptcy Code was amended via BAPCPA. Among the provisions was a requirement
that in healthcare cases filed under Chapter 7, 9, or 11 the U.S. Trustee may also appoint a patient care
ombudsman to protect patient records, monitor care, and represent the interests of patients.

Examiner

Section 1104 of the Bankruptcy Code provides that an examiner may be appointed at the request of a
party in interest if the court determines that such an appointment is in the interests of creditors, any equi-
ty security holders, and other interests of the estate, or if the debtor’s fixed, liquidated unsecured debts
(other than debts owed for goods, services, or taxes or owing to insiders) exceed $5 million. The U.S.
Trustee will make the appointment upon authorization by the court according to Section 1104(d) of the
Bankruptcy Code. Accountants may and often do serve as examiners. Unless limited or expanded by the
bankruptcy court, an examiner’s duty is to "investigate the acts, conduct, assets, liabilities, and financial

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