One of the interesting and often misunderstood roles in a bankruptcy case is the appointment and participation of official committees, most often the official committee of unsecured creditors. The creditors’ committee is appointed by the Office of the U.S. Trustee at the outset of the bankruptcy case. Participation on the committee is a voluntary and unpaid position. The committee is usually of a size between three and seven members picked from the largest 20 unsecured creditors. The committee elects a member to act as chair. The role of the committee is to act as a representative of the entire unsecured creditor body by, including but not limited to investigating matters relevant to the debtor’s financial condition, operations and formulation of a plan of reorganization, and participating in the formation of a plan. Committee members by definition hold their own individual claims against the debtor, but as committee members they are supposed to act in the interest of all creditors.
In Blixseth v. Brown (In re Yellowstone Mountain Club), Case No. 14-35363 (9th Cir. Nov, 28, 2016), the Ninth Circuit affirmed in part and vacated and remanded in part decisions regarding dismissal of claims brought against the chair of the creditors committee. In so doing, the court found that committee members are afforded the same protections for their actions traditionally given to bankruptcy trustees.
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