Differences Between Chapter 7 & 11 Bankruptcy
As the owner or representative of a business in financial trouble, you need to understand the basic differences between a Chapter 7 and a Chapter 11 bankruptcy. In order to select the best course for your business, you need to understand the functions and ramifications of each type of proceeding.
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Chapter 7 Fundamentals
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A Chapter 7 bankruptcy is used by both individuals and businesses. Through a Chapter 7 bankruptcy, an individual or business is able to obtain a discharge of their debt and obligation to creditors.
Chapter 11 Fundamentals
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A Chapter 11 bankruptcy primarily is used by businesses, although in theory, the procedure is available to an individual. A Chapter 11 bankruptcy permits a business to reorganize. There is no discharge of debt. The business continues operations and pays its debts over time.
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Considerations
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The primary consideration is whether or not you desire to keep your business in operation during and after the bankruptcy process. Under Chapter 7 your business is ended, while in a Chapter 11 action, you carry on operations.
Benefits
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The benefits of a Chapter 7 include allowing you what amounts to a financial clean slate through the discharge of your debts. A Chapter 11 bankruptcy provides you the benefit of a reorganized business on stronger footing into the future.
Expert Insight
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A professional evaluation of the financial status of your business is important as you attempt to decide which type of bankruptcy to undertake. There are attorneys that specialize in this arena.
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References
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- Photo Credit Image by Flickr.com, courtesy of Andrew Magill
