Chapter 7 vs. Chapter 11 Bankruptcy

There truly are almost no similarities between Chapter 7 and 11 bankruptcy. By the essence of what bankruptcy is, they both eliminate debts and enact an automatic stay. An automatic stay is what brings relief to the party in debt. With it, creditors are required by law to stop all actions towards the debtor to reclaim debts, whether secured or unsecured. Both forms will also place a court assigned bankruptcy trustee in charge of the company. However, the direction these trustees guide the companies in each form is polar opposite. These are two bankruptcy forms available to businesses. The major differences that create the vast contrast of them are:

Chapter 11

This form of bankruptcy was designed specifically for businesses to help them regain financial stability and work to repay debts. It is similar to Chapter 13 bankruptcy. The principal differences to Chapter 7 are:

• For corporations
• Reorganizes debts
• Maintains assets
• Operated by trustee
• Pays debts fully

Chapter 7

This form of bankruptcy was designed to give individuals a ‘fresh start,’ and to salvage all available worth from a company that can no longer recover from its downturn. The principal differences to Chapter 11 are:

• For Individuals and corporations
• Removes all debts
• Liquidates assets
• Operation ceases
• Pays debts with available liquidation funds

The Main Differences

It is not so much a choice between Chapter 7 and Chapter 11 bankruptcy as it is an obligation. A struggling business that is able to continue operating if help is given will always chose to do so. Chapter 11 forms a new and recovery company. Chapter 7 forms a new group of unemployed workers. Liquidation bankruptcy will be chose by a business only when there is no hope to continue. The difference between a last resort and a contemplated choice is the same as between Chapter 7 and 11 bankruptcy.

Getting Legal Help

There are field specific attorneys that cover bankruptcy. Even further, there are specialized Chapter 11 or Chapter 7 bankruptcy attorneys. They will have firsthand experience with each. The Chapter 7 forms for bankruptcy can be exceptionally tedious, especially for a business, because all assets must be recorded with utmost accuracy. False statements are illegal and depending on the severity can be punishable by a felony. Chapter 7 bankruptcy attorneys will avoid this.

The internet is the best tool for finding the right attorney. With the internet, one can find a multitude of options, and most likely much information about them. Meetings and preliminary information can also be exchange over the internet.