A U.S. bankruptcy judge has denied a request from a small group of General Motors Corp bondholders to become an official committee in the bankruptcy case.

The group, which calls itself the Unofficial Committee of Family & Dissident GM Bondholders and says it represents the interests of some 2,000 individual GM bondholders with about $500 million of GM debt, argued its members were unable to participate in GM's bankruptcy process and were not being represented adequately by GM's official committee of unsecured creditors.

Citing more than a dozen different court decisions, U.S. bankruptcy Judge Robert Gerber rejected the group's request on Tuesday saying he believed the group's interests were adequately represented by GM's 15-member official unsecured creditors' committee, which is unusually large for such a committee.

Judge Gerber also said the unofficial committee would be free to raise objections at GM's sale hearing next week, but the group's arguments did not rise to the exceptional circumstance that would merit the appointment of another official committee.

In bankruptcy cases, official committees can have their fees paid for by the bankrupt company rather than having to come up with the money themselves.

The group's lawyer, Michael Richman, of the Patton Boggs law firm, argued that an official committee was necessary because his clients -- many of them retirees and individual families -- had limited means and that the bondholders were a large disparate group.

Some people think we are insane to be standing in the way of this process, but this is about adequate representation, Richman told the court.

But judge Gerber said additional official committees should only be appointed in extraordinary circumstances because, history tells us when someone else pays for one's expenses, spending restraint goes out the window.

Richman told reporters after the hearing it was likely his clients would continue to object to GM's fast track sale, but he was unsure what they would be able to do given their spending limits. Richman said he was planning to meet the official committee of unsecured creditors to see if they would adopt any of the objections his group has raised.

General Motors, which filed for bankruptcy protection on June 1, is seeking court approval for a government-backed restructuring plan under which the Obama administration would take a 60 percent stake in the newly-formed company made up of GM's most profitable assets. The UAW would have a 17.5 percent stake and the Canadian government would own about 12 percent, while GM bondholders are expected to get about 10 percent.

A court hearing on GM's sale request is scheduled for June 30.

The case is In re: General Motors Corp, U.S. Bankruptcy Court, Southern District of New York. No. 09-50026.

(Reporting by Emily Chasan; editing by Andre Grenon)

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