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.