Archive for the ‘Bankruptcy’ Category

US Bankruptcy Code – Automatic Stay

The US bankruptcy law, chapter – 11 apart from devising a reorganization plan for the petitioner’s business also protects the debtor from the creditor’s attempt to collect their debt during the life time of the case. This feature of the US bankruptcy code chapter – 11 requires for Automatic Stay. The process and behavior of the Automatic Stay on the debtor’s business, is discussed in detail.

Chapter – 11, Automatic Stay

The chapter – 11 of the US bankruptcy code imposes a sort of automatic stay on the debtor’s business processes. The implementation of automatic stay on the business processes of the debtor, restricts or stops all attempts from the creditor’s side for the collection of their debts. The automatic stay feature of the chapter – 11 empowers the US bankruptcy court which is

presiding over the case, to make all post-petition attempts on the part of the creditors to reclaim their debt as void. Thus the debtor is saved from the immense pressure of imminent debt repayment and gets a chance to reorganize the business model, during the lifetime of the case.
The court as it seems perfect, may also appoint trustees to manage the debtor’s businesses. In certain cases, the creditors of the business or the United States Trustee, the one appointed by the court, may ask the court to liquidate the assets of the business, in order to flush out the debt. In that case, the court may convert the case to a liquidation case under the provisions made under chapter – 7, in case the liquidation under chapter – 7 is in the best interest of all the creditors.
In case it is imminent for the court the assets of the debtor’s business, the chapter – 11 of the US bankruptcy law provides the pre-existing management with the option to get help on the liquidation process, so that the business’ liquidation process may fetch higher prices for company’s assets or services, as compared to the price it would have fetched in a chapter – 7 liquidation process.

US Bankruptcy code

US bankruptcy code chapter – 11 is applicable for the business owned and organized under a board of trustees or a single proprietor. However a business planning to file bankruptcy with a US

bankruptcy court under the chapter – 11 of the US bankruptcy code should know about the features of a case filed under the chapter – 11 of the law. Some of these features are designed to relief the debtor from imminent repayment of debt while there are some other features that are designed to do justice to the rights of the share holders of the business, in case the company is listed in the US stock exchanges viz. The New York Stock Exchange, The American Stock Exchange or The NASDAQ. These features are discussed further.

Chapter – 7, Selection Of Plan

The chapter – 11 of the US bankruptcy code usually provisions for reorganization of debtor’s business, and for this purpose  it requires a reorganization plan, also known as the reorganization plan. This plan with some exceptions may be suggested by any of the parties connected directly with the case. The plan then may be voted in or out by the interested creditors.

US Bankruptcy Code

US bankruptcy code chapter – 11 has a number of features and options to restructure the business of the petitioner. This chapter of the US bankruptcy code has many advantages that are discussed in detail.

Advantages :

• The chapter – 11 of the US bankruptcy law affords the petitioner to be able to reorganize and restructure his business.
• A petitioner can acquire finance and loans on favorable terms by giving it’s new creditors first priority on the business’ earnings.
• The bankruptcy court that is preciding over the case may also allow the petitioner / debtor to reject or cancel any contracts that the business has on it’s list of liabilities.
• The bankrupcy case under chapter – 11 also protects the debtors from other litigations that may turn up against the business, through the imposition of an automatic stay order. While the stay order is in place, the bankruptcy court sees to it the stay order is uplifted only when it assumes that the matter can be resolved ih the bankruptcy court, or resumed in it’s original value.
• In case, the debt’s of the petitioning business is more that it’s assets which means that the owners are left with no assets/properties at all, the chapter – 13 of the US bankruptcy court directs that the bankruptcy court overseeing the case must end the owners’ rights for the current owner’s and give the ownership of the newly organized business to the creditors.
• All creditors who have owe to the petitioner are heard by the bankruptcy court. The US bankruptcy court is ultimate deciding authority in determining whether the proposed plan of reorganization complies with the bankruptcy laws.