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Chapter 7 vs Chapter 11

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If you're considering filing for bankruptcy, you may be wondering which chapter is right for you. Chapter 7 and Chapter 11 are two of the most common types of bankruptcy, but they have different requirements and outcomes. In this blog post, we'll break down the differences between Chapter 7 and Chapter 11 bankruptcy and help you decide which one is best for your situation.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is also known as "liquidation" bankruptcy. This type of bankruptcy is designed for individuals or businesses that have little to no assets and cannot repay their debts. In Chapter 7 bankruptcy, a trustee is appointed to sell your non-exempt assets and distribute the proceeds to your creditors. Most unsecured debts, such as credit card debt and medical bills, are discharged in Chapter 7 bankruptcy.

Pros of Chapter 7 Bankruptcy:

  • Quick process (typically takes 3-6 months)
  • Most unsecured debts are discharged
  • You can keep exempt assets, such as your home and car

Cons of Chapter 7 Bankruptcy:

  • You may lose non-exempt assets, such as a second home or luxury car
  • You may have to pass a means test to qualify
  • You may have to give up some of your income to repay your creditors

Chapter 11 Bankruptcy

Chapter 11 bankruptcy is also known as "reorganization" bankruptcy. This type of bankruptcy is designed for businesses and individuals with high levels of debt who want to restructure their finances and continue operating. In Chapter 11 bankruptcy, you will create a plan to repay your creditors over time while continuing to operate your business or manage your personal finances.

Pros of Chapter 11 Bankruptcy:

  • You can continue operating your business or managing your finances
  • You can negotiate with your creditors to reduce your debt
  • You have more flexibility in creating a repayment plan

Cons of Chapter 11 Bankruptcy:

  • The process can be lengthy and expensive
  • You may have to sell assets to repay your creditors
  • Your finances will be closely monitored by a trustee

Which Bankruptcy Option is Right for You?

Deciding which type of bankruptcy is right for you depends on your individual circumstances. If you have little to no assets and cannot repay your debts, Chapter 7 bankruptcy may be the best option. If you have a lot of debt but want to continue operating your business or managing your finances, Chapter 11 bankruptcy may be the better choice.

Contact Our Bankruptcy Lawyers

If you're still unsure which chapter is right for you, it's important to consult with a bankruptcy attorney. The Fuller Law Firm, PC is here to help you navigate the bankruptcy process and make the best decision for your financial future. Contact us today to schedule a consultation.


Start your free case evaluation with a Chapter 13 attorney in San Jose. We're ready to help you become debt-free! Call (408) 465-4472.


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