The following is an executive summary of the “need to know” bankruptcy concepts as they impact creditors in business insolvencies.
CHAPTER 11 vs. CHAPTER 7 -
- Chapter 11 is technically used for bankruptcy reorganizations, while Chapter 7 applies to liquidations. Chapter 11 and Chapter 7 can apply to either business or individual bankruptcies.
- Chapter 11 has been increasingly used as a tool to liquidate business assets as a “going concern”, hence the frequent “liquidating 11”. By contrast, in a Chapter 7 liquidation, the appointed trustee is not permitted to operate the business, except in rare circumstances. Accordingly, any going concern value can be achieved only through a “liquidating” Chapter 11.
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