Chapter 11 vs. Chapter 13: An Overview
There are some celebrity differences between Chapter 11 and Chapter 13 bankruptcy, including eligibility, cost, and the amount of time made to complete the process. Both bankruptcies give debtors the opportunity to stay in business and to restructure their finances.
Excluding some limitations, both bankruptcies allow filers to modify their payment terms on secured debts, attend to arrange for time to sell assets, and eliminate obligations the filer cannot pay over the plan’s term. While both put up with the discharging of debts, more can be discharged under Chapter 13.
Key Takeaways
- Chapter 11 and Chapter 13 bankruptcies countenance for the discharging of debts but have different costs, eligibility, and time to completion.
- Chapter 11 can be done by almost any distinct or business, with no specific debt-level limits, nor required income.
- Chapter 13 is reserved for individuals with long-standing incomes, while also having specific debt limits.
- Chapter 13 includes a trustee appointment that make handle distributing all income to creditors over a three- to five-year time period.
Chapter 11
Nearly everyone can complete for Chapter 11 bankruptcy, including individuals, businesses, partnerships, joint ventures, and limited liability companies (LLCs). There is no specified debt-level limit, nor wanted income. However, Chapter 11 is the most complex form of bankruptcy and generally the most expensive. Thus, it’s scad often used by businesses and not individuals, where companies can use Chapter 11 bankruptcy to restructure their debts and take up operating.
Filing Chapter 11 bankruptcy allows businesses to stay open and continue operating, while reworking their monetary obligations. Filers are able to put forth a reorganization plan, which can include downsizing and expense reduction plans. Numberless large businesses have filed Chapter 11 bankruptcy and came out of bankruptcy later to continue operating, filing General Motors and Chrysler, which both filed for bankruptcy in 2009.
Chapter 13
Chapter 13 bankruptcy can only be lined by individuals with a stable income. Debt limitations are also part of Chapter 13 eligibility, and the limits vary regularly. As of 2019, limits are approximately $419,275 in unsecured debt and $1,257,850 in secured debt. Chapter 13 differs from
Key Characteristics
Chapter 13 involves the appointment of a trustee, while with Chapter 11, this is optional and not usually done. The trustee’s responsibility includes reviewing the bankruptcy proposal, making recommendations to the court, and the collection and distribution of creditor payments.
Chapter 11 bankruptcy time again has complex and expensive proceedings. There are provisions, however, that help to streamline cases involving small enterprise owners. If a debtor meets all the requirements, there’s no limit to a Chapter 11 plan’s duration, though typical patterns are structured for three to five years. The court can extend the time frame of the plan for debtors who need more fix to make the required payments.
The approval process for Chapter 13 bankruptcy is generally much more expedient. There’s a set commitment years, however, of three to five years, during which a debtor must relinquish essentially all disposable income to the deputized trustee for distribution among creditors. The commitment period can be shortened, but never extended.