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Simple English definitions for legal terms
creditors' committee
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A quick definition of creditors' committee:
A creditors' committee is a group of people who represent the people or companies that are owed money by a business that has filed for bankruptcy. The committee works together to negotiate a plan for the business to reorganize and pay back its debts. The committee usually has between 3 and 11 members and serves as an advisory group.
A more thorough explanation:
A creditors' committee is a group of representatives from the creditors involved in a Chapter 11 bankruptcy case. The committee is formed to negotiate the debtor's plan of reorganization. It serves as an advisory body and typically has between 3 and 11 members.
For example, if a company files for Chapter 11 bankruptcy, its creditors may form a committee to represent their interests in the case. The committee may negotiate with the debtor to come up with a plan for reorganizing the company's finances and paying off its debts. The committee may also provide input to the court on matters related to the bankruptcy case.
Another example could be a real estate developer who is facing financial difficulties and files for Chapter 11 bankruptcy. The creditors' committee may work with the developer to come up with a plan to sell off some of the developer's assets to pay off debts and restructure the company's finances.
These examples illustrate how a creditors' committee can play an important role in a Chapter 11 bankruptcy case, representing the interests of the creditors and working with the debtor to come up with a plan for reorganizing the company's finances.