Chapter 11 cases are reorganization cases that are typically filed by businesses and individuals with substantial assets and debt. Chapter 11 is expensive and therefore beyond the reach of the average consumer and small business.
In Chapter 11, the court issues an initial order which protects the debtor from the collection efforts of all creditors. This order is known as the “automatic stay” and is effective even against the IRS. Creditors are not permitted to file lawsuits, continue with lawsuits that are already filed, obtain judgments, garnish wages, garnish bank accounts, levy on property, send dunning letters, make telephone calls or attempt to collect a debt in any other way.
The debtor, or the debtor’s management, have the exclusive right to continue to operate the business of the debtor for 120 days, known as the exclusionary period.
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