When a company files for Chapter 11 bankruptcy, the narrative often sounds reassuring. A restructuring, a fresh start, a fair process for all stakeholders. But for unsecured creditors, including vendors, landlords, service providers, trade partners, and small businesses, the reality is far harsher.
Without representation, unsecured creditors almost always lose.
The Silent Majority in Bankruptcy
Unsecured creditors typically represent the largest class by number, yet they are the least sophisticated and least protected group in a bankruptcy case. Individually, their claims may seem small. Collectively, they often represent tens or hundreds of millions of dollars in value. Without a unified voice, that value is easily ignored.
That is precisely why representation matters.
Representation That Costs Unsecured Creditors Almost Nothing
One of the most misunderstood aspects of Chapter 11 is who pays for unsecured creditor representation.
Under the Bankruptcy Code, when a Committee of Unsecured Creditors is formed, the committee is entitled to retain legal counsel and financial advisors. Those professionals are paid by the bankruptcy estate, not by the individual creditors.
For unsecured creditors, this means no six-figure retainers, no hourly bills, no out-of-pocket legal spend, and no need to individually hire bankruptcy counsel.
Participation on a committee often costs nothing beyond time and engagement, yet it provides professional representation with real leverage.
Failing to pursue committee representation is often the most expensive mistake an unsecured creditor can make.
How the Committee Process Actually Works
Shortly after a Chapter 11 filing, the United States Trustee conducts interviews with unsecured creditors. These interviews are not adversarial. They are designed to determine whether there is sufficient interest and diversity among creditors to form a committee.
If a committee is formed, it becomes a fiduciary body representing all unsecured creditors, not just its individual members.
Once appointed, the committee gains powerful rights. These include access to financial information, standing to object to motions, oversight of DIP financing and budgets, input on asset sales, and authority to investigate insider transactions, liens, and prepetition conduct.
What Happens When There Is No Committee
When no committee is formed, the outcome is disturbingly predictable.
Secured lenders and other senior stakeholders drive the timeline, control the budget, shape the sale process, define enterprise value, and negotiate releases in their favor.
The debtor, reliant on lender-provided DIP financing, has little incentive and often little ability to advocate for unsecured creditors.
In these cases, unsecured recoveries frequently land at zero or near zero, even when value exists.
Secured Creditors Will Always Act in Their Own Interest
This is not a criticism. It is reality.
Secured creditors are rational economic actors. Their fiduciary duty is to their own investors, not to trade creditors, vendors, or small businesses.
The Role of Olympus Guardians
Olympus Guardians focuses exclusively on advocating for unsecured creditors, particularly small and medium-sized businesses that cannot afford to hire large law firms or financial advisors on their own.
By lowering the knowledge and coordination barrier, Olympus Guardians helps unsecured creditors access representation that already exists under the law but is too often unused.
Arian Eghbali’s Impact
Arian Eghbali has built a practice around making bankruptcy intelligible and navigable for unsecured creditors. His work spans committee formation, unsecured creditor advocacy, and post-confirmation recovery efforts.
Representative Matters
Virgin Orbit
Hooters
Forever 21
Global Clean Energy
Coin Cloud
Powin Energy
Kodiak Robotics
Air Pros
BeeHero
JOANN Stores
Sew Group
Denim & Beyond
V&J Soils
Plenty
Boundless
Meyer Burger
SRAN Orchards
AmplifyBio
The Bigger Picture
Bankruptcy is procedural, and procedure favors those who show up organized, informed, and represented. Committees are not about obstruction. They are about balance.
Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal or financial advice. While every effort has been made to ensure the accuracy of the content, it is recommended that you consult with a qualified professional for specific guidance related to your individual circumstances.
