Creditor Rights in Chapter 11
In Chapter 11 bankruptcy, creditors have several rights and responsibilities to ensure their interests are protected:
- Voting on the Reorganization Plan:
- Impaired Claims: Creditors with impaired claims (i.e., those who will not receive full payment) have the right to vote on the reorganization plan. The plan can be confirmed by the court if it is accepted by at least one class of impaired creditors. 13
- Unimpaired Claims: Creditors with unimpaired claims are deemed to have accepted the plan and do not vote. 13
- Automatic Stay:
- Proof of Claim:
- Filing: Creditors should file a proof of claim to ensure their claim is recognized and to avoid any unanticipated changes. The proof of claim must be filed by the deadline set by the bankruptcy court. 6
- Creditor Committee:
- Appointment: A creditors' committee is appointed by the U.S. trustee and consists of unsecured creditors who hold the seven largest unsecured claims against the debtor. This committee acts in a representative capacity for the entire general unsecured creditor body and plays an important role in the Chapter 11 case. 26
- Adequate Protection:
- Collateral Evaluation: Creditors can retain appraisers or other professionals to evaluate the collateral securing their claim and assess any potential risk to that collateral. If the collateral is subject to the threat of losing its value, creditors are entitled to "adequate protection" against losses. 6
- Plan Confirmation: