Chapter 7 vs Chapter 11 Bankruptcy: Here Are the Differences

File for Bankruptcy Chapter 7 vs Chapter 11 Bankruptcy: Here Are the Differences

Chapter 7 vs Chapter 11 Bankruptcy: Here Are the Differences

Bankruptcy isn't a one-size-fits-all solution. Instead, there are various chapters you may need to utilize in order to handle your specific financial load. Learn the difference between Chapter 7 vs Chapter 11 bankruptcy, for example, so that you understand which of these works better for your situation.

DoNotPay can help you learn the difference between the two. We'll also help you get started with the filing process so you no longer have to worry about debt collectors coming after you during this already stressful time.

What Is Chapter 7 Bankruptcy?

Chapter 7 differs from Chapter 11 and Chapter 13 in that it includes the process of liquidation. In fact, another name for this type is Liquidation Bankruptcy. A trustee gains control of your assets and then:

  1. Sells them
  2. Distributes the money to your creditors
  3. Leaves you with the exempt property so you can start anew

You may want to send a 609 letter to the credit bureaus first in an attempt to get negative accounts removed.

What are the Exemptions?

There are a few typical exemptions that cannot be sold. Those things that impact your daily life and ability to work are included, such as:

  • Your main residence
  • Your primary vehicle
  • Your retirement account

Process Length and Credit Report Timing

Although the length of the process may only take a few months, it takes years before a chapter 7 bankruptcy goes off your credit report.

  • Process Length: 4 to 6 months on average
  • Amount of Time on Credit Report: 10 years

Costs for Filing and Additional Expenses

The filing costs and additional expenses can vary from state to state, but there are some averages set by the United States Court that can help you determine what to expect:

Initial Filing Fee$245
Administrative Fee$78
Trustee Fee$15
Credit Counseling CourseUp to $50
Attorney FeesUp to $1,530 at the most expensive median range

What Is Chapter 11 Bankruptcy?

Chapter 11 bankruptcy is also called Reorganization Bankruptcy. It is often used for businesses, but individuals may attempt to use it as well. Typically, chapters 7 and 13 are more worthwhile for the average person.

When companies want to remain in business and continue their operations, they can attempt to file for a Chapter 11 bankruptcy that allows them to create a plan for how they will continue while still paying their debts. If more than 3 creditors file against the business, this form of bankruptcy may be forced upon them.

Individuals with more than $394,725 in credit card debt, or $1,184,200 in secured debt from a mortgage, car payment, or similar, may choose to use Chapter 11. Chapter 13 sets these debt limits. Many wealthy business owners and celebrities are required to file under this option.

Process Length and Credit Report Timing

  • Process Length: Can take between 4 and 18 months to create a plan, but years to pay off debtors
  • Amount of Time on Credit Report: Up to 10 years

Costs for Filing and Additional Expenses

The fees and other expenses associated with this type of bankruptcy can vary greatly. Expect to pay roughly:

  1. Initial Filing Fee: $1,717
  2. Legal Fees: Up to $10,000

How to Begin Filing for Bankruptcy

If you want to file for bankruptcy yourself, you need to be sure you're choosing the right type. Chapters 7, 11, and 13 all offer different benefits. Once you're sure about going through with the process, you'll want to do the following:

  • Get a copy of your credit report.
  • Gather your financial documents, including pay stubs, tax returns, bank statements, retirement account details, and even appraisals for property you own.
  • Print and fill out all of the bankruptcy filing forms.
  • Take a credit counseling course and earn a certificate.
  • File the forms and your certificate with the court and pay the associated filing fee. (You can also request a fee waiver.)
  • Wait to receive your case number, trustee's name, and the date and time for your trustee meeting.
  • Mail your documents to your trustee.
  • Take a Debtor Education Course and file the certificate you earn.
  • Attend a 341 meeting—meeting of creditors—roughly 1 month after you're filing date.

File for Bankruptcy With DoNotPay's Assistance

When you're looking at Chapter 7 vs Chapter 11 bankruptcy, you need to be sure you're selecting the right one for your situation. Instead of trying to file on your own and struggling through the process, let DoNotPay do it for you in just a few steps.

  1. Search for the File for Bankruptcy product on DoNotPay.

     

  2. Put together a list of your debts, expenses, and assets. If you need help accessing information like your credit report, DoNotPay can help you get your information.

     

  3. Let DoNotPay walk you through your bankruptcy options and help you determine whether a Chapter 7, Chapter 12, or Chapter 13 bankruptcy is right for you.

     

  4. DoNotPay will then help find the best credit counseling course near you, which you need to complete before filing your bankruptcy forms.

     

  5. Lastly, DoNotPay will gather all of the forms you need (including available fee waivers) and help you locate your nearest bankruptcy court. All you have to do is complete the required forms, prepare your filing fee, and file the application with your local court.

     

You'll be protected from debt collectors once the case is filed. However, you still need to complete a bankruptcy debtors course to prove you understand how to improve your financial situation.

What Else Can DoNotPay Help Me File?

Worrying about debt collections and bankruptcy isn't all that's on your mind. When you need to file additional complaints or paperwork, DoNotPay can assist with that as well. We'll help:

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