What are the differences between the various chapters of bankruptcy? (2024)

FAQs

What is the difference between bankruptcy chapters? ›

A consumer debtor receives a complete discharge from debt under Chapter 7, except for certain debts that are prohibited from discharge by the Bankruptcy Code. Chapter 11 bankruptcy provides a procedure by which an individual or a business can reorganize its debts while continuing to operate.

The biggest difference between Chapter 7 and Chapter 13 is that Chapter 7 focuses on discharging (getting rid of) unsecured debt such as credit cards, personal loans and medical bills while Chapter 13 allows you to catch up on secured debts like your home or your car while also discharging unsecured debt.

Unlike a Chapter 7 bankruptcy, which allows the debtor to discharge some debts in exchange for the sale of nonexempt property to pay creditors, Chapter 13 allows the debtor to keep their property and repay creditors in a three or five year court-approved repayment plan.

Chapter 12 and Chapter 13 are basically the same filing, except that Chapter 12 is for family farmers and Chapter 13 is for other individuals. As long as you have a steady, reliable income, less than $269,250 in unsecured debt and less than $807,750 in secured debt, you can file Chapter 13.

While Chapter 7 bankruptcy often forgives your debt, Chapter 13 bankruptcy basically reorganizes it. The court approves a monthly payment plan so you can pay back a portion of your unsecured debt and all of your secured debt over a period of three to five years.

In a Chapter 10 bankruptcy management is displaced, and a court-appointed manager or trustee oversees the reorganization or restructuring process. This is generally not the case in a Chapter 11 filing.

Chapter 7 and Chapter 13 bankruptcy handle eliminating your debt differently. With Chapter 7, unsecured debts are discharged and assets may be liquidated to repay your creditors. On the other hand, with Chapter 13, you keep assets but must submit to a plan to repay creditors.

Chapter 11 bankruptcy is used by larger businesses and individuals whose obligations exceed the Chapter 13 bankruptcy debt limits. By contrast, Chapter 13 is often the better choice for individuals and sole proprietors.

The main difference between Chapter 9 and Chapter 11 bankruptcies is who can use them. While Chapter 9 applies to certain government entities, Chapter 11 bankruptcy allows a business or individual to reorganize its debts and obligations.

Chapter 11 can be done by almost any individual or business, with no specific debt-level limits and no required income. Chapter 13 is reserved for individuals with stable incomes, while also having specific debt limits.

What is the difference between Chapter 7 11 and 13 quizlet? ›

Chapter 7 is a liquidation: Trustee will collect and then sell off debtor's non-exempt assets to pay off debts. Chapter 11 and 13 are reorganization: Debtor will keep most of his property but will use future income (earnings) to pay off debts.

Key Takeaways

A Chapter 7 bankruptcy will sell off many of your assets to pay your creditors. In a Chapter 13 bankruptcy, you keep the assets but must repay your debts over a specified period. Bankruptcy can do severe damage to your credit score and should be considered a last resort.

In contrast to a case under Chapter 11 of the Bankruptcy Code, which centralizes a company's debt adjustment efforts in the U.S. and provides for expansive oversight and supervision by a U.S. court, a Chapter 15 recognition proceeding is an ancillary proceeding in which the U.S. court acknowledges the foreign ...

Debt Repayment – Chapter 12 allows debtors to cram down debts – pay the current market value of a property instead of the whole debt – on almost all secured debt. Conversely, in a Chapter 11 case, you will make all required payments in the reorganization plan until you get a discharge.

Background. A case filed under chapter 11 of the United States Bankruptcy Code is frequently referred to as a "reorganization" bankruptcy. Usually, the debtor remains “in possession,” has the powers and duties of a trustee, may continue to operate its business, and may, with court approval, borrow new money.

Chapter 11 is the chapter used by large businesses to reorganize their debts and continue operating. Corporations, partnerships, and limited liability companies cannot use chapter 13 to reorganize and must cease business operations if a chapter 7 bankruptcy is filed.

Of the two options, Chapter 7 is more popular because filers don't have to pay back part of their debts. Chapter 13 may be a better solution if you're in arrears on your mortgage because you can keep your house in Chapter 13 and have time to get caught up on payments.

Chapter 7 stays on your record for 10 years, while Chapter 13 stays for seven years. That would seem to suggest that Chapter 7 is worse for your credit score, but with Chapter 7, your debt, or at least the unsecured debt, will be gone. That means you can try to start rebuilding it immediately.

If you file for Chapter 13 bankruptcy, you'll be able to pay your attorney fees over time as a part of your court-ordered payment plan. So while the total attorney fees are higher than with Chapter 7 bankruptcy, you won't have to pay them all upfront.