Chapter 11 vs Chapter 13: Key Differences

Chapter 11 and Chapter 13 are two types of bankruptcy filings under the U.S. Bankruptcy Code, each serving different purposes and catering to different types of debtors.

Chapter 11: Business Reorganization

• Purpose: Chapter 11 is primarily used by businesses to reorganize their debts and continue operating under court supervision. 23
• Eligibility: Available to corporations, partnerships, and individuals with significant debt levels that exceed Chapter 13 limits. 26
• Process: Involves creating a reorganization plan that must be approved by creditors and the court. The debtor typically remains in control of the business as a "debtor in possession". 24
• Key Features:
  • Allows businesses to restructure debts and operations.
  • Provides protection against creditor actions through an automatic stay.
  • Can involve selling assets free and clear of liens with court approval. 34

Chapter 13: Individual Debt Reorganization

• Purpose: Chapter 13 is designed for individuals with regular income to reorganize their debts and make payments over a three- to five-year period. 15
• Eligibility: Limited to individuals and married couples with unsecured debts below $419,275 and secured debts below $1,257,850. 7
• Process: Involves creating a repayment plan that must be approved by the court. Payments are made to a trustee who distributes them to creditors. 17
• Key Features:
  • Allows individuals to restructure debts and make manageable payments.
  • Provides protection against creditor actions and foreclosure.
  • Can help individuals catch up on mortgage payments and keep their homes. 78

Key Differences

• Eligibility: Chapter 11 is more commonly used by businesses, while Chapter 13 is for individuals.
• Debt Limits: Chapter 13 has specific debt limits, whereas Chapter 11 does not.
• Control: In Chapter 11, the debtor typically remains in control of the business, whereas in Chapter 13, a trustee is involved in managing payments.
• Purpose: Chapter 11 focuses on business reorganization, while Chapter 13 focuses on individual debt reorganization.