The bankruptcy court’s decision to dismiss a bankruptcy case, usually in response to a request by the lender or another creditor. Upon dismissal, the debtor and its property no longer have the protections of the Code, including the automatic stay, and creditors are free to resume their pre-bankruptcy efforts to collect their debts.

Be careful what you ask for. Dismissal of the debtor’s bankruptcy case also means that creditors lose the benefit of having the debtor and its property subject to the control and watchful eye of the bankruptcy court. Often lenders would rather strike a deal with a creditors’ committee or a trustee to use the bankruptcy court to collect and liquidate its collateral in the bankruptcy court because it is often a more convenient forum than state courts or other federal courts.

Bankruptcy Code §§ 349, 1112.

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