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

Chapter 11 and Chapter 13 bankruptcies are both federal laws that allow individuals and businesses to reorganize their debt, but there are important differences between the two. Chapter 11 bankruptcies are more commonly used by businesses. This type of bankruptcy allows the debtor, who is typically a business, to continue to operate while it reorganizes its debt. The debtor must create a plan to repay its creditors over time, and the creditor and the bankruptcy court must approve the plan. Chapter 11 bankruptcies can be very complicated, but they allow the debtor to remain in business. Chapter 13 bankruptcies, however, are available only to individuals, not to businesses. This type of bankruptcy allows an individual debtor to create a three- to five-year repayment plan and pay back some, or all, of the debt owed. Unlike Chapter 11 bankruptcies, the debtor does not need to create a plan that is approved by a creditor or a court. The debtor merely needs to demonstrate to the court that he or she can afford to make the payments. Both Chapter 11 and Chapter 13 bankruptcies can help individuals and businesses get a fresh financial start. However, it is important to remember the differences between the two when deciding which bankruptcy law is best for your situation.

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

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