The core difference between Chapter 7 and Chapter 11 is what happens to your property. Chapter 7 sells off assets you can’t shield with exemptions and discharges most of your remaining unsecured debt in about three to four months. Chapter 11 lets you keep your assets and keep operating while you restructure what you owe under a court-approved repayment plan that can run for years. Chapter 7 is faster and cheaper. Chapter 11 is built for businesses and for individuals whose finances are too large or complex for a straight liquidation.
Chapter 7 vs. Chapter 11 at a Glance
- What it does: Chapter 7 liquidates non-exempt property and discharges qualifying debts. Chapter 11 reorganizes debts under a plan while the debtor keeps operating.
- Who typically files: Chapter 7 is used mostly by individual consumer filers. Chapter 11 is used primarily by corporations and partnerships, plus individuals whose debts exceed Chapter 13’s limits.1Internal Revenue Service. Chapter 11 Bankruptcy – Reorganization
- Timeline: Chapter 7 discharge usually arrives three to four months after filing. Chapter 11 can run for years, especially for individual debtors whose discharge waits on completed plan payments.2United States Courts. Chapter 7 – Bankruptcy Basics
- Filing fee: $338 for Chapter 7, $1,738 for Chapter 11.
- Attorney fees: Roughly $1,000 to $3,500 for a straightforward Chapter 7. Chapter 11 typically runs into tens of thousands, and large corporate cases into six or seven figures.
How Chapter 7 Works
Chapter 7 is a liquidation. A court-appointed trustee takes your non-exempt property, sells it, and distributes the proceeds to creditors. Whatever qualifying debt remains is discharged. In practice, most Chapter 7 cases are “no-asset” cases because everything the filer owns falls within allowed exemptions and there is nothing for the trustee to sell.2United States Courts. Chapter 7 – Bankruptcy Basics
The Means Test
Individual filers whose debts are mostly consumer debts must pass a means test to qualify for Chapter 7.3Office of the Law Revision Counsel. 11 US Code 707 – Dismissal of a Case or Conversion to a Case Under Chapter 11 or 13 The test compares your household income against the median income for your state and household size, drawn from Census Bureau and IRS data.4United States Department of Justice. About the U.S. Trustee Program Means Testing Below the median, you pass. Above it, the court runs a more detailed calculation of disposable income and may push you toward Chapter 13 instead.
What You Keep and What You Lose
Federal exemptions protect categories like home equity, a vehicle, household goods, jewelry, and the tools you use to earn a living. States maintain their own exemption lists, sometimes more generous and sometimes less, and some states require you to use the state list. Anything outside those exemptions is fair game for the trustee.2United States Courts. Chapter 7 – Bankruptcy Basics
Timeline
Between 21 and 40 days after filing, the trustee holds a meeting of creditors where you answer questions under oath. The discharge order typically follows 60 to 90 days after that meeting.2United States Courts. Chapter 7 – Bankruptcy Basics Total time from filing to discharge is usually three to four months.
How Chapter 11 Works
Chapter 11 does not liquidate. Instead, the debtor proposes a plan to reorganize debts and pay creditors over time while continuing to operate. It is used primarily by corporations and partnerships, but individuals whose debts exceed the Chapter 13 limits also file under Chapter 11.1Internal Revenue Service. Chapter 11 Bankruptcy – Reorganization
Debtor-in-Possession
There is normally no takeover trustee. The Chapter 11 debtor stays in control of assets and daily operations as a “debtor-in-possession,” running the business and making payroll while also taking on the legal duties of a trustee, including a fiduciary obligation to creditors.5United States Courts. Chapter 11 – Bankruptcy Basics A court can appoint a separate trustee if there is fraud, dishonesty, or gross mismanagement, but that is the exception.
The Reorganization Plan
The debtor has an exclusive 120-day window after filing to propose a plan; no one else can submit a competing plan during that period.6Office of the Law Revision Counsel. 11 US Code 1121 – Who May File a Plan The plan sorts creditors into classes and spells out which debts get paid in full, which get reduced, and over what timeline. Affected creditors vote, and the court must confirm the plan before it takes effect.5United States Courts. Chapter 11 – Bankruptcy Basics
When Discharge Happens
For a corporate debtor, discharge occurs at plan confirmation.7Office of the Law Revision Counsel. 11 US Code 1141 – Effect of Confirmation For individual debtors, discharge waits until all plan payments are completed, which can take years. If the reorganization fails, the court can convert the case to a Chapter 7 liquidation or dismiss it.1Internal Revenue Service. Chapter 11 Bankruptcy – Reorganization
Subchapter V for Small Businesses
Standard Chapter 11 was designed for large corporate restructurings, and its legal fees, creditors’ committees, and procedural steps can overwhelm a small business. Subchapter V, created in 2019, offers a faster, simpler track for small businesses with combined secured and unsecured debts of $3,424,000 or less, at least half of which come from business activities.5United States Courts. Chapter 11 – Bankruptcy Basics
Under Subchapter V there is no automatic creditors’ committee, no required disclosure statement unless the court orders one for cause, and only the debtor can file the reorganization plan. A trustee is appointed, but the trustee’s role is to help the debtor work with creditors and oversee the plan, not to take over the business. The court can confirm a plan even without creditor support, as long as the debtor commits all projected disposable income for three to five years toward plan payments. Costs and timelines drop considerably compared to standard Chapter 11, though Subchapter V still runs more expensive than a Chapter 7.
Debts Neither Chapter Can Erase
Some obligations survive bankruptcy no matter which chapter you file under. Federal law lists 19 categories of non-dischargeable debts for individual debtors.8United States Courts. Discharge in Bankruptcy The ones that most often surprise filers:
- Child support and alimony obligations.
- Recent income taxes and any tax debt involving fraud. Older tax debts may qualify for discharge under narrow circumstances.
- Government-funded or guaranteed student loans, unless the debtor can show “undue hardship,” a standard courts have historically read very narrowly.
- Debts arising from fraud, false pretenses, or fraudulent financial statements.9Office of the Law Revision Counsel. 11 US Code 523 – Exceptions to Discharge
- Debts for willful injury to another person or their property (these may be dischargeable in Chapter 13, one of the rare places the chapters diverge on discharge scope).8United States Courts. Discharge in Bankruptcy
- Personal injury debts caused by drunk driving.
- Court-ordered fines, restitution, and penalties owed to government agencies.
There is also a timing rule to watch. Luxury purchases over $500 made within 90 days of filing, and cash advances over $750 taken within 70 days, are presumed non-dischargeable.9Office of the Law Revision Counsel. 11 US Code 523 – Exceptions to Discharge Courts treat that kind of last-minute spending as bad faith.
Credit Report Impact
A bankruptcy filing under any chapter can stay on your credit report for up to 10 years from the date the court enters the order for relief.10Office of the Law Revision Counsel. 15 USC 1681c – Requirements Relating to Information Contained in Consumer Reports There is no statutory distinction between chapters on that ten-year window.11Consumer Financial Protection Bureau. How Long Does a Bankruptcy Appear on Credit Reports?
The practical recovery is different, though. A Chapter 7 discharge arrives within months, so you can start rebuilding sooner than someone still years into a Chapter 11 plan. Lenders looking at an older filing tend to weigh what you have done since more heavily than the filing itself.
Which One Fits Your Situation
Chapter 7 makes sense when your debts far exceed your assets, you have no business you need to keep running, and your income is low enough to pass the means test. You give up non-exempt property in exchange for a fast, clean discharge. For most individual consumer filers, this is the right path.
Chapter 11 is the better fit when you own a business worth preserving, hold assets you would lose in a liquidation, or carry debts above the Chapter 13 limits. You keep control and keep operating, but you pay for it in time, complexity, and legal fees. If you are a small business owner under the $3,424,000 debt cap, Subchapter V gives you much of Chapter 11’s flexibility without the full procedural weight.