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  • Atricle Dump - Creditors' Committees under Bankruptcy Reform: More Representative?

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    ier in theory than in practice, as large cases tended to be replete with public debt, managed by institutional holders. The result, often, was that smaller trade cr
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    The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), attempted to redress what was perceived to be a failing under prior law. In Chapter 11 Cases (especially larger cases), smaller “trade” creditors and smaller interests were often frozen out of the process and of qualification for Committee membership, by the mere presence of huge bondholder representatives, pension funds, and the like. The intention, under earlier law, was to create a Committee, generally of seven members, consisting of the largest unsecured creditors, with claims generally representative of the types of debt extant in the case. This, of course, proved easier in theory than in practice, as large cases tended to be replete with public debt, managed by institutional holders. The result, often, was that smaller trade cre
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    Cases (especially larger cases), smaller “trade” creditors and smaller interests were often frozen out of the process and of qualification for Committee membership, by the mere presence of huge bondholder representatives, pension funds, and the like. The intention, under earlier law, was to create a Committee, generally of seven members, consisting of the largest unsecured creditors, with claims generally representative of the types of debt extant in the case. This, of course, proved easier in theory than in practice, as large cases tended to be replete with public debt, managed by institutional holders. The result, often, was that smaller trade cr
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    en members, consisting of the largest unsecured creditors, with claims generally representative of the types of debt extant in the case. This, of course, proved easier in theory than in practice, as large cases tended to be replete with public debt, managed by institutional holders. The result, often, was that smaller trade cr
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    ier in theory than in practice, as large cases tended to be replete with public debt, managed by institutional holders. The result, often, was that smaller trade creditors, or “mom and pop” businesses were simply not given a seat at the table, and were effectively not afforded the advantages of participation in the reorganization negotiation process.

    Under prior law, a conflict developed in the Courts as to whether the bankruptcy court had the power to direct the U.S. Trustee to increase Committee size so as to redress this imbalance of power. It is clear now under BAPCPA that it does, if the creditor seeking membership can satisfy a two-part test: The first part requires that the creditor be a “small business concern,” as that term is defined under the Small Business Act. The definition of that test is b

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