What’s the Difference Between Chapter 7, 11, and 13?

When facing financial challenges, it’s important to understand the options available to manage debt. Chapter 7, Chapter 11, and Chapter 13 are three types of bankruptcy filings, each designed for different situations. Here’s a quick breakdown of their differences:

Chapter 7: “Liquidation” Bankruptcy

• Best For: Individuals or businesses with limited income and overwhelming debt.
• What It Does: This involves selling non-exempt assets to pay off creditors. Exempt assets (not sold) are items like clothing, electronics, bank accounts, retirement accounts, jewelry, pets(!) and collectibles, just to name a few.
• Key Features:
  • Quick process (3-6 months).
  • No repayment plan required.
  • Not ideal if you have an excessive amount of assets that exceed exemption limits.

Chapter 11: Business Reorganization

• Best For: Businesses or individuals with significant income and complex debt.
• What It Does: Allows businesses or individuals to reorganize their debts and continue operating while repaying creditors under a court-approved plan.
• Key Features:
  • Often used by corporations.
  • Flexible repayment options.
  • Lengthy and costly process.

Chapter 13: Wage Earner’s Plan

• Best For: Individuals with a steady income who want to keep their assets.
• What It Does: Creates a repayment plan to pay off debts over 3-5 years without liquidating assets.
• Key Features:
  • Retain your home and car.
  • Structured repayment plan based on income.
  • Longer timeline than Chapter 7.

This information was taken from a variety of online resources as well as AI. We The People can not advise which Chapter to file. We The People exclusively prepare Chapter 7 petitions.