Does the Automatic Stay Apply to Business Debtors?

If your business is considering a bankruptcy filing, or if you have previously filed for personal bankruptcy (or know someone who has), you may know about the tremendous power of the automatic stay. The automatic stay is an injunction that takes effect as soon as a debtor’s bankruptcy petition is filed. That injunction stops creditors and debt collectors from taking any debt-collection actions against the debtor or continuing any existing debt-collection actions. Accordingly, any wage garnishments will stop, lawsuits will come to a halt, foreclosure actions are stopped, and even phone calls or emails and other forms of contact will stop. Likewise, no new lawsuits or legal actions can be taken.

For individual debtors or married couples who file for personal bankruptcy, the automatic stay can stop foreclosure on their homes and much more. But does the automatic stay also apply to business debtors? In short, the answer is yes.

What the Automatic Stay Means for a Business Filing for Bankruptcy

When a business files for bankruptcy — whether a reorganization bankruptcy or liquidation bankruptcy — the automatic stay will apply.

In any type of business reorganization bankruptcy, which our firm can assist you with, the automatic stay will immediately pause ongoing legal actions against your business to collect debt, as well as any new collection-related actions.

This means your business will not face any new lawsuits or actions to repossess business property, and any repossession that is already underway will be halted by the automatic stay. As such, your business will be able to retain secured assets that it needs to run the company — whether that means motor vehicles for deliveries, kitchen equipment, and more.

Automatic Stay Applies to Business Debtors in All Types of Business Bankruptcies

The automatic stay will apply to business debtors filing all types of business bankruptcies, as we noted above. That includes debtors who file for Chapter 11 bankruptcy, Chapter 12 bankruptcy, and the relatively new Subchapter V bankruptcy. Your business will receive the benefits of the automatic stay. Then, as you restructure debt, you will be able to catch up on all past-due debt with your secured creditors over time such that any existing or potential legal actions will no longer be necessary for the creditor to collect debt.

During your case, all secured and priority unsecured debt will get repaid in full. If your business has unsecured nonpriority debt, it may be dischargeable at the end of your bankruptcy case.

Contact a West Palm Beach Bankruptcy Attorney for Assistance with Your Business Bankruptcy Filing

At Kelley Kaplan Delaney & Eller, PLLC, we have years of experience representing businesses in bankruptcy filings in South Florida. We know how important a reorganization bankruptcy can be to a business, allowing a business to restructure debt while keeping the doors open and maintaining a client or customer base. Our firm can help you to determine which type of reorganization bankruptcy is best-suited to your specific business and your needs, and we can assist you through every step of your bankruptcy case. Contact one of the experienced West Palm Beach bankruptcy lawyers at Kelley Kaplan Delaney & Eller, PLLC today to find out more about how we can help you and about the services we provide to small businesses in South Florida.

Source:

law.cornell.edu/uscode/text/11/362