The Unsecured Creditors Committee in the Sports Authority bankruptcy case is requesting that the case be converted from a Chapter 11 proceeding to a Chapter 7 case.

The Committee argues that preparing a bankruptcy exit plan would only reduce the potential payout to creditors. They are requesting a hearing on its Conversion Motion on August 2, when a hearing that Sports Authority negotiated with its term loan lenders is scheduled to take place.

Under the agreement, pre-petition lenders will take $71 million of the $240 million they claim they’re owed. The deal also includes payment in full for vendors that shipped goods after the early March Chapter 11 filing as well as fees to bankruptcy professionals. Landlords will receive 85 percent payment for owed rent for March that has long been in dispute.

The Unsecured Creditors Committee said it’s appropriate to hold both hearings on the same day because the Committee objects to the term loan settlement.

“The argument on the Conversion Motion is linked to the relief requested by the Debtors and Term Loan Lenders in the Settlement Motion,” said the committee in a court document. “As the Settlement Motion and the TL Settlement Agreement contemplate the continuation of these cases on a knowingly administratively insolvent basis, and the Conversion Motion is predicated upon the same administrative insolvency, the Conversion Motion should be heard at the same time as the Settlement Motion. The Committee will urge that the Settlement Motion should be denied and that instead these administratively insolvent cases should be converted to cases under Chapter 7.”

Sports Authority filed for Chapter 11 bankruptcy in March, moving to close about one fourth of its 463 stores. Failing to reorganize, however, Sports Authority chose in early May to liquidate instead. Going-out-of-business sales at its remaining 320 stores have been taking place since Memorial Day. The sales are scheduled to be completed by the end of August, but the retailer last week moved to close most of its stores by July to save on administrative costs.