What is the difference between a Chapter 11 and a Chapter 7 bankruptcy?
Chapter 7 bankruptcy may be used by businesses that wish to liquidate and terminate their business. Under Chapter 7 bankruptcy, the company usually stops all its operations and goes completely out of business. A trustee is appointed to liquidate (sell) the company’s assets and the money is used to pay off debt. If the business is owned as a sole proprietorship, then the sole proprietor is eligible to receive a discharge of his or her business and non-business debts. Under Chapter 11, a debtor has the opportunity to restructure its secured debt payments; to reject burdensome leases; to pay tax obligations over time; to sell unneeded assets; to pay unsecured claims at a discount, and to have claims determined by the court. Unlike a Chapter 7 case, the appointment of a trustee to oversee the case is the exception, not the rule. In a Chapter 11, current management of the debtor operates the debtor as a “debtor-in-possession”, although operations are strictly supervised by the Bankruptcy Co
