THE FOLLOWING QUESTIONS AND ANSWERS OUTLINE HOW THE PROCESS WORKS:

How does the process begin?
A debtor, realizing that they are unable to meet the payment demands of their unsecured creditors, will notify those creditors of a meeting to propose a "work out" plan. In this manner, the debtor will, in all likelihood, request a "breathing spell", during which it can more accurately identify its problems and propose solutions.

What is the benefit to unsecured creditors of a "breathing spell" and why should creditors agree to it?
The "breathing spell" affords the creditors in general, and the creditor's committee in particular, the opportunity to perform well-informed analyses to determine both the viability of the debtor and the feasibility of the proposed economic treatment to creditors.

Can unsecured creditors demand a meeting?
Yes. Very often the more significant creditors can get an immediate response to address, amongst other things, the continuation of supply to the debtor on terms acceptable to its creditor body.

What happens at these meetings?
Normally, the initial meeting will follow this outline:

1. Debtor will address the creditors on their "overall" financial condition and what caused their financial distress.

2. The debtor may ask for a temporary "freeze" for an interim period(s) of time, where debt payments will not be made.

3. The debtor will ask that a creditor's committee be formed so that effective monitoring, communications, and a negotiation process can be ensured.

4. A time frame is usually targeted for a proposed plan to be formulated, which will provide for the settlement and satisfaction of debts. This will be submitted to the creditor's committee for its review, analysis, and recommendation to the entire unsecured creditor body.

How is the creditor's committee formed?
It has been found that a creditor's committee works most efficiently when kept to a member number of 7 to 9. It is a volunteer process that begins with addressing the creditors with the largest unsecured debt.

What if I'm not one of the largest, but I still want to be on the committee?
The composition of the committee is determined informally by the creditors present. Thus, there is no absolute prohibition on a creditor from serving on the committee so long as the other participating creditors agree.

When does the committee initially meet?
Usually, immediately following the debtor's representation, and in many instances, the committee will schedule its meetings subsequent to it having conducted initial due diligence.

What takes place at this meeting?
The meeting should follow this outline:

1. Committee members select a chairperson.
2. Engage a committee secretary.
3. Engage an attorney who will represent the interests of all unsecured creditors.
4. Review debtor presentation.

What services will the Secretary provide to the committee, and who has experience in this position?
The NACM Great Lakes Adjustment Bureau has over 30 years' experience in services provided to unsecured creditor's committees. We coordinate all arrangements for committee meetings, compile and distribute all meeting minutes, respond to creditors' inquiries, claim maintenance, and serve as balloting and disbursing agent.

Won't we need an attorney that specializes in "out-of-court" workouts, and where can we get a recommendation?
Yes, there are attorneys who specialize in this field, and it is to the advantage of the unsecured creditors to retain such a professional. The NACM Adjustment Bureau will be glad to give you a recommendation.

Who pays for these services?
The debtor.

Why do we need them if this just adds another debt to a financially distressed business?
The ability to obtain, review, and make the appropriate analyses of the many legal issues that arise in a workout is best achieved through the use of skilled professionals. With their assistance, the negotiation leverage of the unsecured creditors is significantly enhanced.

What are the expectations placed on the creditor's committee for the benefit of all creditors?
A committee is required to act in a manner which is consistent with better interests of all unsecured creditors.

What do we hope will be the eventual outcome of this process?
The goal is to obtain the maximum recovery for all unsecured creditors in the most expedient and cost efficient manner.

OK, let's say I receive one of these letter from a customer, or I am one of several creditors who would like to arrange a meeting with a debtor. What should I do first?
Call the NACM Adjustment Bureau. Information and consultation if FREE.