What is the difference between Chapter 7 and Chapter 11?

Chapter 7 and Chapter 11 are both forms of bankruptcy in North Dakota. The most significant difference between them is their purpose. Chapter 7 is a liquidation or “straight” bankruptcy. It is usually used by individuals or companies with significant debt who can’t pay it back. In a Chapter 7 bankruptcy, the court liquidates or sells the debtor’s non-exempt assets so that the proceeds can be used to pay the creditors. After the creditors are paid, any remaining debt is discharged, or forgiven. Chapter 11, on the other hand, is a reorganization bankruptcy. This type of bankruptcy is usually for companies who have more assets than debt and need to reorganize their finances. In Chapter 11 bankruptcies, the court will recognize the debtor as a “debtor in possession”. This allows the debtor to stay in control of their finances while they reorganize their debts in order to make them more manageable. They can also propose a repayment plan to creditors that will provide additional payment or a reduced payoff. Chapter 11 bankruptcies are also generally longer than Chapter 7 bankruptcies, with most cases lasting a year or more. In summary, the primary difference between Chapter 7 and Chapter 11 is their purpose. Chapter 7 is a liquidation bankruptcy, while Chapter 11 is a reorganization bankruptcy. Chapter 7 bankruptcies are typically used to eliminate debt, while Chapter 11 bankruptcies are used to reorganize debt to make it more manageable.

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