Division reports, past issues of A Lawyer’s View and other procurement documents are available on our Internet web site. Point your web browser to
http://www.ogc.doc.gov/ogc/cld.html
Officeof
Fina
nce & LitigationContract Law Di
vis
ionDepar
tm
ent of CommerceOffice
of General C
ounselCONTRACT LAW DIVISION
Office of the Assistant General Counsel for Finance and Litigation
A Lawyer’s View of a Stay in Bankruptcy
September 1, 1998
From the Editor: Ken Lechter is a senior attorney in the
Contract Law Division who advises NIST and other
clients.
A Lawyer’s View is a periodic publication of the Contract
Division designed to provide practical advice to the
Department’s procurement officers. Comments, criticisms
and suggestion for future topics are welcome.—Call
Jerry Walz at 202-482-1122, or via e-mail to Jerry
Walz@FinLit@OGC or jwalz@sage.ogc.doc.gov.
To [Be] Stay[ed] or Not To [Be] Stay[ed],
That is the [Contracting Officer’s]
Question
by
Kenneth A. Lechter
{T}he filing of a bankruptcy petition operates as a stay,
applicable to all entities, of [inter alia] . . . the
commencement or continuation, . . . of a judicial,
administrative, or other action or proceeding against the
debtor that was or could have been commenced before
the commencement of the [bankruptcy] case . . . or to
recover a claim against the debtor that arose before [pre-
petition].11 U.S.C. ¶362 (a)(1)
Introduction
There are many issues that can arise where a contracting officer is
faced with the legal labyrinth known as the Federal Bankruptcy
Code (11 U.S.C. §§ 101-1330). However, one of the most basic is
the circumstance where the contracting officer may want to take
some negative action against a contractor, and is notified that the
contractor has just filed a petition in bankruptcy. In particular,
what is the impact of the bankruptcy code’s automatic stay
provision on the Government’s right to enforce its contracts, and,
specifically, its right to terminate a contract for default or
convenience? Additionally, how does the stay affect the
Govern