In Chapter 11 bankruptcy, what is the main purpose of the protection from creditors?

In Chapter 11 bankruptcy, the primary purpose of protection from creditors is to allow the reorganization of the company's debts. This legal framework enables a financially distressed business to restructure its obligations while continuing to operate, which is vital for preserving its value and allowing it a chance to return to profitability. During this process, the company can negotiate terms with creditors and make more manageable payment plans, rather than being forced to liquidate assets immediately.

The other options do not align with the essence of Chapter 11. The intent is not to prevent criminal activity, facilitate an immediate liquidation of assets, or ensure immediate payment of debts. Instead, the focus is on providing the time and opportunity necessary for the business to stabilize and develop a plan to repay creditors while maintaining its operations. This structured approach is particularly beneficial for companies with viable long-term prospects seeking relief from the pressures of immediate debt obligations.