What is the difference between Chapter 7 and Chapter 11 Bankruptcy?

Chapter 7 and Chapter 11 Bankruptcies differ in the type of debt that can be discharged and the process of filing. Chapter 7 Bankruptcy is a liquidation or fresh start bankruptcy. It is designed to enable debtors to discharge most, if not all, their unsecured debts such as credit card balances, medical bills, payday loans, and personal loans. To file for Chapter 7 bankruptcy, debtors must complete a means test to determine their eligibility. In some cases, these debtors may be required to liquidate some of their assets in order to pay off the debt. On the other hand, Chapter 11 Bankruptcy is a reorganization bankruptcy. It is designed to keep the debtor in business and allow them to repay their debts within a 3–5 year repayment plan. Debtors can keep their assets, but they must make regular payments to creditors for the duration of the repayment plan. This type of bankruptcy is most often filed by businesses, but individuals can file for Chapter 11 as well. In short, Chapter 7 Bankruptcy is designed to help individuals discharge their unsecured debt and eliminate it from their financial obligations, while Chapter 11 Bankruptcy is designed to help businesses and individuals reorganize their debt and keep their assets while making regular payments to creditors.

Related FAQs

What is the difference between Chapter 7 and Chapter 11 Bankruptcy?

Related FAQs

Related Blog Posts