The Court in the City of Detroit municipal bankruptcy proceeding has issued a decision granting the City’s motion to disband the Official Committee of Unsecured Creditors that had previously been appointed in the case by the U.S. Trustee. In so deciding, the Court concluded that the U.S. Trustee does not have automatic power to appoint an unsecured creditors committee in a municipal bankruptcy proceeding, and may do so only in instances where an interested party makes the request, and only upon a finding by the Court that it is necessary to assure adequate representation of unsecured creditors.
In addition to outlining when a creditors’ committee may be appointed, the decision provides greater insight into the role and duties of the U.S. Trustee in a Chapter 9 municipal bankruptcy proceeding.