What is the difference between a Chapter 11 and a Chapter 13 bankruptcy?

The two most common types of bankruptcy in Maryland are Chapter 11 and Chapter 13. While both can help individuals manage their debts, there are important differences between them. Chapter 11 bankruptcy is typically filed by businesses or other entities, though individuals can use it, too. This type of bankruptcy prevents creditors from taking collection action while a court-approved reorganization plan is developed. It is also known as “reorganization” bankruptcy, since it allows debtors to restructure their debts into more manageable payments. Chapter 13 bankruptcy is for individuals who have a steady income and do not qualify for Chapter 7 bankruptcy. This type of bankruptcy, also known as a “wage earner’s plan,” allows individuals to keep their property and make payments to their creditors through a 3- to 5-year repayment plan. The debtor’s disposable income is used to repay debts according to the court-approved plan. In general, Chapter 13 bankruptcy takes longer to complete and is a more complex process than Chapter 11 bankruptcy. On the other hand, Chapter 11 is typically more expensive and an individual debtor must have enough disposable income to make the payments. To decide which type of bankruptcy is right for you, it’s best to speak with a qualified financial and/or legal professional.

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What is the difference between a Chapter 11 and a Chapter 13 bankruptcy?

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