Chapter 7 bankruptcy involves the sale of a debtors non-exempt holdings and the allocation of the income of the sale to the creditors.
Chapter 11 bankruptcy filing allows for the restructuring of an organizations or individuals asset, in order to continue operations and pay creditors back over an allotted period of time.
A chapter 13 bankruptcy protection allows a debtor with an expected income to restructure their debts, while retaining their assets and pay creditors back over a set period of time.
The key differences between these types of bankruptcies are as follows:
- Chapter 7- involves liquidation; the debtor is seeking to start over and discharge most debts and may be required to forfeit most of their property in order to service their creditors.
- Chapter 11- involves Reorganization; the debtor does not have to liquidate their assets and there are not restrictions to the amount of money owed by the debtor.
- Chapter 13 – involves Modification of Debts; the debtor most have a regular reliable income and must get on an agreed upon repayment plan.