One of the features of a Chapter 11 bankruptcy case in the United States is that creditors are automatically barred, under what is called the “automatic stay,” from collecting against the debtor or canceling contracts. The law differs somewhat in the United Kingdom, but a trade group there is pointing to US law as an example to follow.
Under US bankruptcy law, a creditor wanting to repossess, foreclose, sue or collect against a Chapter 11 debtor must first obtain permission from the bankruptcy judge overseeing the case. The judge may allow a creditor, for example, to repossess a vehicle which the debtor does not need, cannot afford to keep, and cannot sell to pay other creditors. Unless a creditor requests permission from the bankruptcy court and shows these or other circumstances allowing the creditor to proceed, the bankruptcy stay remains in place throughout a Chapter 11 case.
The focus of the campaign in the United Kingdom appears to be on what U.S. bankruptcy law calls “executory contracts” or leases. In the United States, these contracts are protected at least for a period of time, and can generally be kept in place if the debtor can cure any default and prove an ability to continue performing the contract.
If you are considering requesting Chapter 11 bankruptcy protection, you should consult with an attorney familiar with Chapter 11 bankruptcies to discuss your options. For a free consultation, call (480) 719-1152.