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Chapter 7 vs. Chapter 11 Bankruptcy

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In a Nutshell

Chapter 11 bankruptcy can be quite similar to Chapter 7 bankruptcy. But it's also really different. Learn how each type of bankruptcy can provide you with debt relief.

Written by Jonathan Petts
Updated July 20, 2023

For many people, filing for bankruptcy relief is a difficult decision. Once the decision is made, however, it’s time to decide what type of bankruptcy to file. If you're not eligible to file for Chapter 13 bankruptcy, it helps to understand the difference between Chapter 7 vs. Chapter 11 bankruptcy before making a decision.

The United States bankruptcy laws have the goal of giving the unfortunate but honest debtor a fresh start. One way that can be accomplished is by having a bankruptcy trustee liquidate (sell) the debtor's assets for the benefit of creditors as part of a Chapter 7 bankruptcy proceeding.

Another way this can be done is by helping the debtor in possession to make a good faith effort to reorganize their business affairs in an orderly manner and under the supervision of the United States Trustee. This is true whether the debtor is a small business debtor, an individual debtor doing business as a sole proprietor, or a large business filing for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code.

In Chapter 11 bankruptcy, the debtor in possession proposes a plan of reorganization to restructure its assets and liabilities.  In a Chapter 7, the bankruptcy estate is liquidated for the benefit of creditors. Since court approval is needed for all bankruptcy plans, and Chapter 7 liquidation proceedings are handled by a Chapter 7 trustee, creditors are protected from any intentional gross mismanagement on the part of the debtor.

Who Can File Chapter 7 vs. Chapter 11?

An individual debtor (or married couple) can file under both Chapter 7 and Chapter 11 of the U.S. Bankruptcy Code as long as they meet the minimum eligibility requirements. That's right - even though Chapter 11 bankruptcy is most often referred to in the context of a big business filing for bankruptcy protection, like General Motors, Sears, or most recently, Purdue Pharma, individuals can file Chapter 11 as well.

Corporations, partnerships, and other business entities can also file under both Chapter 7 or Chapter 11 of the Bankruptcy Code.

What is the Difference Between Chapter 7 vs. Chapter 11?

For a business, a Chapter 7 case is the final step in shutting down the business. Businesses that file under Chapter 7 do so to get the protections of the automatic stay and the benefits of all bankruptcy protections available to them while going through a Chapter 7 liquidation. They do not continue business operations. 

The difference between Chapter 7 vs. Chapter 11 for a business is that Chapter 11 allows a business to continue operating. The Chapter 11 is a reorganization bankruptcy for the business. Each class of creditors can be provided for in the bankruptcy plan proposed by the Chapter 11 debtor in possession, often in the form of monthly payments distributed based on the types of debt the filer has. Unsecured creditors typically receive the lowest priority when it comes to receiving payments from the bankruptcy estate

Individuals who file under Chapter 7 vs. Chapter 11 are able to get rid of thousands of dollars in unsecured debts, in a relatively short period of time and without committing their disposable income to a repayment plan. Creditors’ claims are paid only if there is nonexempt property the Trustee can sell. Since individuals are able to protect most personal belongings, this happens in less than 10% of Chapter 7 cases.[1]

Individuals can utilize Chapter 11 bankruptcy to reorganize their financial affairs by proposing a bankruptcy plan for court approval. But, Chapter 11 bankruptcy is intended for much larger bankruptcy cases, making it much more complicated and expensive. Individuals may file Chapter 11 bankruptcy because they have too much debt for a Chapter 13 bankruptcy. 

How do I Pay Creditors Back in a Chapter 7 vs. Chapter 11 Case?

Debts are handled differently in Chapter 7 vs. Chapter 11 cases. Debtors in Chapter 7 cases do not pay creditors back. If the bankruptcy trustee sells property as part of the administration of the case, unsecured creditors receive a share of the money. Debtors in Chapter 11 cases pay back different classes of creditors in different ways through a bankruptcy plan. The Debtor routinely makes regular payments to creditors after filing a Chapter 11 bankruptcy proceeding. 

How is Property Handled in a Chapter 7 vs. Chapter 11 Case?

A Chapter 7 case is a liquidation bankruptcy. Debtors who have non-exempt equity in property may lose that property in a Chapter 7 vs. Chapter 11 case.

Most Chapter 7 cases filed by individuals are no-asset cases. No-asset cases mean the debtors keep all assets, but get rid of substantial debts.

A business that files Chapter 7 vs. Chapter 11 closes its doors. The trustee sells the business assets to pay unsecured creditors in a Chapter 7 case. Secured creditors repossess or foreclose on the collateral, including real estate. Unsecured claims are paid in order of the priorities set by the U.S. Bankruptcy Code. 

In a Chapter 11 case, the debtor chooses whether to keep or surrender property to the secured creditor holding the lien. A lien is a security interest that gives the creditor the ability to take property back if the debt is getting paid, either through a repossession or foreclosure. The property with the lien on it is called the collateral. If the property does not have a lien and it does not serve as collateral for a secured debt, the debtor is generally able to keep all property.

Can I Lose Property in a Chapter 7 vs. Chapter 11 Case?

Each bankruptcy case is different. However, most people who file a Chapter 7 case don't lose any property because everything they own is protected by an exemption. As a result, debtors in Chapter 7 bankruptcy don't pay back any unsecured creditors as part of their bankruptcy case.

In a Chapter 11 case, the debtor generally keeps all property, but must pay back creditors based on a set of rules under the Bankruptcy Code.

How Long Does It Take to Complete a Chapter 7 vs. Chapter 11 Case?

The time to complete a Chapter 7 vs. Chapter 11 bankruptcy case is very different.

A Chapter 7 case for individuals can be completed in four 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. A Chapter 7 for a business could be completed in a year or two, depending on the size of the business.

Are the Forms Different for a Chapter 7 vs. Chapter 11 Case?

The basic bankruptcy forms in a Chapter 7 vs. Chapter 11 are the same in both bankruptcy cases. The filing of a bankruptcy petition officially starts both types of bankruptcy. 

Chapter 11 cases have additional forms that must be filed. A “plan of reorganization” and the related disclosure statements are two of the forms in a Chapter 11 case that is not in a Chapter 7 case.

The forms in a Chapter 11 case are more complicated than forms in a Chapter 7 case.

Do I Have To Attend A Court Hearing in a Chapter 7 vs. Chapter 11 Case?

Debtors must attend a meeting of creditors in each bankruptcy case regardless of filing under Chapter 7 vs. Chapter 11. However, Chapter 7 cases usually don't have any other court hearings, unless the individual debtor is reaffirming a car loan.

There are numerous court hearings a debtor attends in a Chapter 11 bankruptcy case. 

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Who Controls the Business in a Chapter 7 vs. Chapter 11 Filing?

In a Chapter 11 filing, the owners of the business continue to operate the business. The debtor is considered the “debtor in possession” because generally no trustee is involved. The debtor in possession has the exclusive right to propose a bankruptcy plan of reorganization for a certain period of time.

Unsecured creditors may form a creditors' committee to ensure the bankruptcy plan meets their best interests under the bankruptcy laws. After a certain period of time, creditors are able to file a competing plan. The debtor's bankruptcy plan can propose different treatment for creditors' claims and even cram down secured creditors by changing the terms of the repayment, including the interest rate.

Ultimately, the court determines what's in the best interest of creditors and approves a bankruptcy plan and related disclosure statements following a confirmation hearing. 

In a Chapter 7 case the trustee takes over to close down the business. This typically involves selling off all of the debtor’s assets for the benefit of unsecured creditors. The trustee has a duty to act in the best interest of the unsecured creditors while administering the case. The trustee may operate the business for a short time if that generates more money for the creditors.

Do Businesses Receive a Discharge of Debts in a Chapter 7 vs. Chapter 11 case?

Businesses do not receive a discharge of debts. In a Chapter 7 case, the business closes. In a Chapter 11 case, the business reorganizes its debts in a repayment plan.

What is the Cost Difference Between Chapter 7 vs. Chapter 11?

The cost difference between Chapter 7 vs. Chapter 11 is extremely wide. The attorney fees for a Chapter 7 case are much lower than the attorney fees for a Chapter 11 case. Also, most Chapter 7 bankruptcy proceedings are handled on a flat fee basis. The flat fee is typically in the $750 - $3,000 range, depending on the case specifics. The attorney fee is paid before the case is filed. Only rarely does a Chapter 7 individual debtor have to pay additional attorney fees after filing a Chapter 7 bankruptcy. Chapter 11 cases are usually billed on an hourly basis, with the minimum amount charged by the attorney just to file the case often exceeding $20,000. Once the case is filed, the bankruptcy lawyer will continue to bill for all work done on behalf of the bankruptcy estate (subject to Court approval).  

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 $338. It costs more than $1,700 just to file a Chapter 11 case. 

The filing fees are not the only difference in cost for a Chapter 7 vs. Chapter 11 case. Chapter 11 debtors in possession  must pay quarterly fees to the U.S. Trustee’s Office while the case is open. The same is not true for bankruptcy proceedings under Chapter 7 of the Bankruptcy Code. 

A debtor is not required to pay fees to a Chapter 7 trustee. The initial filing fee is typically the only fee a Chapter 7 debtor pays to the Court. The fees in a Chapter 7 vs. Chapter 11 case are much lower in Chapter 7.

Do I Need an Attorney for a Chapter 11 Case?

A Chapter 7 vs. Chapter 11 bankruptcy filing is very different. Chapter 11 cases require an extensive knowledge of the Bankruptcy Code

Individual debtors who file for Chapter 7 bankruptcy don’t have to hire an attorney for their bankruptcy case, but given the complexity of the bankruptcy proceedings under Chapter 11, your case is significantly more likely to result in a favorable outcome if you hire a law firm to help you. Interestingly, after a Chapter 11 bankruptcy is filed, the law firm or lawyer that represents the individual debtor now has a duty to act in the best interest of the bankruptcy estate and the unsecured creditors. 

Business entities have to hire a lawyer to participate in a bankruptcy proceeding, either as a debtor or as a creditor. 

You can file a Chapter 7 case without an attorney. Upsolve can help you complete the forms to file a Chapter 7 case. We are a non-profit company that helps individuals who need a fresh start, but who can’t afford an attorney.

How Do I Decide Between Chapter 7 vs. Chapter 11? 

Chapter 11 bankruptcy is an extremely expensive process that makes sense for high net-worth individuals who need a way to restructure their obligations. Notable individuals who filed for Chapter 11 bankruptcy include Hall of Fame Quarterback Johnny Unitas, Real Housewife of New York Sonja Morgan and Oscar winner Kim Basinger.  

If you're not among the (maybe not so rich) and famous and can't afford to pay your credit cards, car loan, or medical bills because your regular income isn’t enough to cover it all, you probably need to file a Chapter 7 case. A Chapter 7 case gets rid of most, if not all, of your unsecured debts.


  1. American Bankruptcy Institute. (2002). Bankruptcy by the Numbers - Chapter 7 Asset Cases. ABI Journal. Retrieved August 4, 2020, from

Written By:

Jonathan Petts


Jonathan Petts has over 10 years of experience in bankruptcy and is co-founder and CEO of Upsolve. Attorney Petts has an LLM in Bankruptcy from St. John's University, clerked for two federal bankruptcy judges, and worked at two top New York City law firms specializing in bankrupt... read more about Jonathan Petts

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