Differences Between Chapter 11 and Chapter 7 Bankruptcy

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LEXINGTON, KY, October 18, 2022 /24-7PressRelease/ — Key differences between Chapter 11 and Chapter 7

Two different chapters of the Bankruptcy Code, Chapter 7 and Chapter 11, are alternative forms of bankruptcy that are both available to individuals and businesses facing difficult financial circumstances.

Attorney Matthew Bunch said: “Bankruptcy is a scary concept to most people, but bankruptcy laws exist to give people and businesses in financial difficulty a chance to start over.”

In a Chapter 7 bankruptcy, assets are liquidated to pay creditors, with secured debts taking priority over unsecured debts. In a Chapter 11 bankruptcy, a business is restructured under the supervision of a court-appointed trustee. The business continues to operate, paying off its debts with future profits.

Both forms of bankruptcy require a trustee to be appointed by the bankruptcy court. Chapter 7 is generally used by individuals, while Chapter 11 is more often used by businesses due to its complexity and cost.

How Does Chapter 7 Bankruptcy Work?
Chapter 7 bankruptcy, or “liquidation” bankruptcy, allows the debtor to sell assets and use the proceeds to pay off debts. While some debts, such as tax liens and child support, cannot be waived, most debts can be discharged. According to the US Courts Administrative Office, there were nearly 400,000 non-commercial bankruptcy filings in 2021, with 70% of those cases being Chapter 7 bankruptcies.

Lawyer Thomas Bunch explains: “In these uncertain financial times, many people are struggling with insurmountable debt, and bankruptcy may be their only option to get back on stable ground.”

Chapter 7 bankruptcy can be a good option for people who are burdened with crippling debt and have no way to pay it off. To be eligible to file for Chapter 7, you must first provide information about your income, assets, expenses, and debts as part of a “means test” to determine if you can afford it. to repay some of your debts.

How Does Chapter 11 Bankruptcy Work?
Chapter 11 bankruptcy, often referred to as reorganization bankruptcy, allows businesses to continue operating while business debts are restructured. Chapter 11 can be a viable option for struggling small business owners who need debt relief but want to keep their business going.

About Bunch & Brock
Bunch & Brock’s experienced attorneys can help you navigate debt solutions like bankruptcy. For more than 30 years, they have been helping overwhelmed clients overcome their financial problems.


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