A Chapter 11 case begins with the filing of a petition with the bankruptcy court where the debtor has its principal place of business or assets. 11 U.S.C. § 301, 28 U.S.C. § 1408.
Upon filing a petition for relief under Chapter 11, the debtor assumes an additional identity as the “debtor in possession.” 11 U.S.C. § 1101. The term refers to a debtor that keeps possession and control of its assets while undergoing a reorganization under Chapter 11. Generally, as “debtor in possession” the debtor operates the business and performs many of the functions that a trustee performs in cases under other chapters, including the right, with the court’s approval, to employ attorneys, accountants, appraisers, auctioneers, or other professional persons to assist the debtor during its bankruptcy case. 11 U.S.C. § 1107(a). Other responsibilities include filing tax returns and reports …show more content…
The stay automatically goes into effect when the bankruptcy petition is filed and provides a breathing spell for the debtor, during which negotiations can take place to try to resolve the difficulties in the debtor’s finances. 11 U.S.C. § 362(a). Under specific circumstances, the secured creditor can obtain relief from the automatic stay. For example, when the debtor has no equity in the property and the property is not necessary for an effective reorganization, the secured creditor can seek an order of the court lifting the stay to permit the creditor to foreclose on the property, sell it, and apply the proceeds to the debt. 11 U.S.C. § 362(d). Unsecured creditors can also seek relief from the automatic stay, for example, to continue state court litigation that was pending before the Chapter 11 case was