Bankruptcy is a challenging reality for many businesses, and it is not always easy to understand the intricacies of the bankruptcy process. While bankruptcy may not be the ideal solution for all struggling businesses, there are certain benefits that come with a bankruptcy filing, specifically, the automatic stay. Learn more about the automatic stay and discover how a commercial bankruptcy attorney can help your business return even stronger after bankruptcy.
Firstly, organizations that are beginning bankruptcy proceedings should understand exactly what the automatic stay is. As a codified provision in the United States Bankruptcy Code, the automatic stay prevents a creditor from engaging in any debt collection activities when a debtor is working through a bankruptcy filing. The automatic stay applies to both individuals and businesses, and it is applicable in all chapters of the Bankruptcy Code. While this action seems fairly simple, there are several important things to know about how the automatic stay works in a bankruptcy case.
1. Automatic stays can be imposed immediately after a bankruptcy case is filed.
Whether a bankruptcy case is filed voluntarily or involuntarily, automatic stays can be implemented immediately after filing. This immediate relief is one of the most significant benefits to officially filing for bankruptcy as businesses can quickly take advantage of a respite from actions against them. While some aspects of the bankruptcy process move slowly in the court system, the automatic stay is one of the few actions that provides rather rapid relief for a struggling organization. A skilled bankruptcy attorney ensures an automatic stay is implemented as soon as possible after a company files for bankruptcy.
2. An automatic stay can help a debtor get organized.
One of the most complex parts about a business struggling with finances is often related to creditors demanding progress on outstanding debts. As debts continue to mount and companies get farther behind on payments, it can be difficult for a business owner to focus on anything other than working with creditors. However, after filing for bankruptcy and imposing the automatic stay, companies can take time to focus on their internal structures and create strategies to exit bankruptcy proceedings. An experienced commercial bankruptcy attorney provides guidance to business owners regarding restructuring, reorganization, filing necessary claims, and addressing any other challenge related to bankruptcy.
3. An intentional violation of the automatic stay can have serious consequences.
Because an automatic stay is designed to give debtors an opportunity to organize their finances and prepare for bankruptcy proceedings, creditors can be penalized if they knowingly proceed and ignore it. A creditor that violates the automatic stay can potentially face penalties, including fines, sanctions, and attorney’s fees paid to the debtor. Even if a debtor did not have a right to the property, purposeful actions disregarding the automatic stay could still result in a creditor being prosecuted. A bankruptcy attorney advises creditors and debtors on the best ways to proceed after an automatic stay has been filed to avoid any potentially detrimental consequences.
No business wants to find itself in a position where it needs to consider bankruptcy. However, in many cases, filing for bankruptcy gives a business the chance to restructure and reorganize in a way that helps it succeed in the future. Business owners can set themselves up for success when they work with a team of bankruptcy attorneys that have experience with all facets of bankruptcy proceedings, including automatic stays. The commercial bankruptcy attorneys at the Dallas law firm of Ritter Spencer Cheng PLLC are the ideal team for businesses that are considering filing for bankruptcy or are already in bankruptcy. Work with our team to achieve a solution that meets the needs of all parties involved in a bankruptcy case.
