Chapter 11 is a form of bankruptcy that involves a reorganization of a debtor’s business affairs, debts, and assets, and for that reason is known as “reorganization” bankruptcy. The main difference is that the entity filing for bankruptcy remains in control of operations and is not required to liquidate assets.

What is the difference between Chapter 11 and Chapter 7 bankruptcies?

Chapter 11 bankruptcy is a business reorganization plan, often used by large businesses to help them stay active while repaying creditors. Chapter 7 bankruptcy doesn’t require a repayment plan but does require you to liquidate or sell nonexempt assets to pay back creditors.

What is Chapter 7 liquidation?

Liquidation under Chapter 7 is a common form of bankruptcy. Chapter 7 provides relief to debtors regardless of the amount of debts owed or whether a debtor is solvent or insolvent. A Chapter 7 Trustee is appointed to convert the debtor’s assets into cash for distribution among creditors.

Can the IRS take my tax refund if I filed Chapter 7?

Any return that results from income earned after filing for bankruptcy is yours to keep. A tax refund that’s based on the income you earned before filing will be part of the bankruptcy estate no matter if you receive it before or after the filing date.

When to file Chapter 7 vs Chapter 11 bankruptcy?

The time to complete a Chapter 7 vs. Chapter 11 bankruptcy case is very different. A Chapter 7 case for individuals can be completed infour to six months. Chapter 11 cases for individuals can last several years. A business that files under Chapter 11 is in bankruptcy for several years in most cases.

How much does it cost to file a Chapter 7 bankruptcy?

The court filing fees for Chapter 7 vs. Chapter 11 cases are much lower as well. The filing fee for a Chapter 7 case is $335. It costs $1,717 to file a Chapter 11 case. The filing fees are not the only difference in cost for a Chapter 7 vs. Chapter 11 case.

How are bankruptcy cases assigned to a judge?

Bankruptcy cases are randomly assigned to judges. And when a firm files for Chapter 11, the judge has some discretion over leaving it in Chapter 11 or converting it to Chapter 7. It turns out that different judges have different interpretations of the law and tend toward either Chapter 7 or 11.

Can a limited liability company file for Chapter 11 bankruptcy?

With Chapter 11, a company can stay open while the court helps restructure its debts. Large corporations are most likely to file for Chapter 11 bankruptcy, but limited liability companies and partnerships can file, as well. Individuals rarely file under Chapter 11 unless they have extremely large debts that are ineligible for Chapters 7 and 13.