What Is the Difference Between a Chapter 11 Filing and Other Bankruptcy Filings?


Quick Answer

Small businesses looking to restructure can use a Chapter 11 bankruptcy, while Chapter 7 bankruptcy requires filers to return assets such as homes or cars to their creditors, FindLaw explains. Chapter 11 bankruptcy is often an alternative to Chapter 13, Nolo reports.

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Full Answer

Chapter 11 bankruptcy is often a time-consuming and risky process, explains Nolo. While going through the Chapter 11 process, a business can continue to operate as long as it is owned by a partnership, a limited liability company or a corporation. Chapter 11 bankruptcy does not require a creditors' committee, unlike other types of bankruptcy. The creditors' committee is assembled to represent the unsecured creditors.

Another type of bankruptcy different from Chapter 11 is a Chapter 7 bankruptcy. This is known as liquidation bankruptcy, and it is a process by which the debtor's non-exempt assets are sold; the proceeds from that sale are used to pay off the filer's debts, About.com explains. The remaining debt is forgiven, and the debtor starts over fresh with no debt. As of 2015, those assets that may be exempt from bankruptcy include household goods, clothing, a personal vehicle and a primary residence. Chapter 11 bankruptcy requires the debtor to pay off his debts, Nolo explains.

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