Chapter 11 vs. Chapter 7 or 13

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How Does Chapter 11 Bankruptcy Differ From Chapter 7 or 13 Bankruptcy?

Chapter 11 vs. Chapter 7 or 13

Chapter 11 bankruptcy is the exact opposite of a Chapter 7 action, which calls for liquidation of all assets of the debtor, the proceeds of which are then divided amongst the creditors. A company getting relief under Chapter 11 is allowed to continue operating as a going concern. Its former creditors are supposed to receive payment in full (or sometimes an agreed upon percentage) of all debts owed prior to the filing of the petition over a pre-arranged payment schedule. In this way, Chapter 11 is somewhat like a Chapter 13 bankruptcy, wherein creditors agree to accept payments on outstanding debts over time without demanding a full liquidation of all assets. Individuals are technically allowed to file a Chapter 11 petition also but few do. The cost and paperwork requirements are normally too daunting for an individual, so Chapter 13, which accomplishes much the same result, is selected in most cases.



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