Chapter 11 bankruptcy is a legal tool that Tennessee businesses are often able to utilize when their financial hardships force them to take action over their debts. Other forms of bankruptcy exist, but Chapter 11 bankruptcy offers businesses the opportunity to reorganize in an attempt to turn profits and improve their economic positions. Regardless of the form of bankruptcy that a business chooses, when it begins the bankruptcy process it must follow the particular rules established for the type of bankruptcy it intends to pursue.
One important part of the Chapter 11 bankruptcy process is the establishment of the creditor committee. A creditor committee is made up of seven unsecured creditors to whom the filing business owes money. The committee has the right to review the business reorganization process and may directly contact the debtor business about the status of the bankruptcy case. In essence, the creditor committee provides a check to the business's actions once it receives protection under the Chapter 11 bankruptcy process.
Creditor committees may be represented by legal counsel. The creditors that are selected to serve on the committee receive their placements from the trustee assigned to the bankruptcy case. Usually the creditors who receive committee appointments are the ones to whom the debtor business owes the most money.
Bankruptcy is not always the end of a business, as Chapter 11 bankruptcy may be an effective way for a Tennessee business to secure a fresh start. Other forms of business bankruptcy exist and readers of this legal blog may desire to speak with their bankruptcy attorneys about those options. Those who pursue Chapter 11, however, will be subject to the review of a creditor committee as they work toward the end of their bankruptcy proceedings.