What Is The Difference Between Chapter 7 And Chapter 11 Bankruptcy?
If you are considering trying to resolve your debt issues by filing for bankruptcy, you might be familiar with the two most common types of bankruptcy: Chapter 7 and Chapter 11. While both types of bankruptcy share similarities, there are also some distinct differences that you should be aware of if you are considering bankruptcy as a way to protect yourself from your creditors.
Chapter 11, in particular, can be quite complex, and you might need to consult with an attorney to determine what type of bankruptcy best suits your needs. Bradford Law Offices, PLLC has represented clients in all forms of bankruptcy. Our attorneys have the knowledge and experience to review your situation and help you determine what type of bankruptcy might be the best option for you. Call us at (919) 758-8879 to set up a consultation with our bankruptcy attorneys.
Below, we’ll discuss Chapter 7 bankruptcy, Chapter 11 bankruptcy, and the differences between the two types.
What is Chapter 7 Bankruptcy?
In most cases, individuals who are filing for Chapter 7 bankruptcy are not high-income earners and may not have many assets. Many of these assets can be exempted from repossession through the bankruptcy process.
To find out if you are eligible to file for Chapter 7 bankruptcy, you must pass what is known as the Means Test. If the test reveals that your monthly income is less than your monthly expenses, then you would likely qualify for Chapter 7.
Once you have filed for bankruptcy, the following steps will take place:
- You will be assigned a trustee – The trustee’s job will be to oversee your case. If any of your assets are being surrendered in the bankruptcy case or if you have assets that cannot be exempted, the trustee will be responsible for liquidating those assets and distributing the funds to your creditors.
- You will meet with the creditors – The trustee’s meeting with the creditors is defined under Section 341 of the Bankruptcy Code. This is an opportunity for any creditors to appear and ask questions.
- The trustee will review your assets – The trustee will review your assets and determine which of your assets are exempt. The trustee will then make a report with the bankruptcy court. If all of your assets are exempt, the trustee will file a “no asset” report.
- You will receive a discharge from the court – At the end of the process, you will receive a discharge from the court. The discharge permanently prevents your creditors from trying to collect on the debt owed them.
What is Chapter 11 Bankruptcy?
Chapter 11 bankruptcy shares some similarities with Chapter 7, but it is also more complex.
Usually, an individual who opts to file for Chapter 11 bankruptcy does so because that person has a large number of assets that they wish to retain. Unlike in Chapter 7 bankruptcy, an individual who files for Chapter 11 will pay into a proposed bankruptcy plan for a number of years, after which they will receive their discharge from the court.
Here are the steps in Chapter 11 bankruptcy:
- A trustee is assigned to the case – As is the case with Chapter 7 bankruptcy, the court will assign a trustee to your case.
- The debtor submits a plan to the court – The plan is the debtor’s proposal on how to reorganize the debt and pay off the creditors.
- The debtor meets with the trustees and creditors – The trustee will host a meeting between the debtors and creditors. The trustee will swear you in, ask you a series of questions, then let the creditors ask questions or make a statement for the record.
- The plan will be confirmed or denied – The creditors and trustee will review the plan that is submitted by the debtor. Creditors are allowed to make objections or suggest an alternative plan. Your proposed plan will be confirmed or denied by the court.
- The debtor will make monthly payments as stipulated by the plan – Once your plan has been approved, you will begin making payments to creditors each month as stipulated by the proposal. These payments may continue for many years, depending on what type of debt you have.
- The plan is completed – At this stage, the debtor is then given a discharge by the court and creditors can no longer collect on any debts.
Contact Us Today
Bradford Law Offices, PLLC specializes in all forms of bankruptcy law. We have the knowledge and skills to help you decide what type of bankruptcy is right for you. Call us today at (919) 758-8879 to set up a consultation with one of our attorneys.