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What is the difference between Chapter 7 and Chapter 11?

Dealing with bankruptcy is stressful. Not only is it stressful to deal with an unmanageable amount of debt, but it is also stressful to work through which option is right for you. If you are dealing with a lot of personal debt in Pennsylvania and are considering bankruptcy, your two major choices are to file for Chapter 7 or Chapter 11 bankruptcy. According to, Chapter 7 bankruptcy is often known as “straight” bankruptcy, while chapter 11 is a “reorganization” bankruptcy.

 Chapter 7 bankruptcy is probably what most people think of when the word “bankruptcy” is mentioned. This is when the assets of a debtor are liquidated in order to cover at least a nominal percentage of the debtor’s debt. This is when houses or cars are repossessed, and, in return, the debtor gets a discharge from debt liability.

 Chapter 11 bankruptcy, on the other hand, restructures debts in order to make them manageable for the individual or business to pay. Chapter 11 is most often undertaken by businesses, but for individuals with high enough income, it is a way to get out of debt without going through liquidation. With Chapter 11, you are allowed to keep your home and other assets provided you can stick with a payment program.

 Chapter 7 bankruptcy tends to be the quickest form of bankruptcy to go through, usually not lasting more than a few months; it is also the cheapest form in terms of paying legal help. On the other hand, there is no time limit on a Chapter 11 bankruptcy, and often the payment plans stretch between three and five years depending.

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