A filing under Chapter 11 of the United States Bankruptcy Code allows the operators of the business to maintain control over it through the bankruptcy process. Traditionally, the Chapter 11 process is considered a “reorganization” bankruptcy, although that is not always the case. Chapter 11 bankruptcy cases are almost always more costly than liquidation bankruptcies. An experienced bankruptcy lawyer will examine your particular circumstances to determine whether a Chapter 11 case can help you realize the optimal result.
If Chapter 11 is normally considered a “reorganization” bankruptcy, then a Chapter 7 bankruptcy is a “liquidation” bankruptcy. In the case of a business, this means that its assets, including litigation and certain bankruptcy claims, will be placed in the hands of a Chapter 7 Trustee. The debtor’s responsibility is to fully and fairly report its assets liabilities and financial affairs. Although creditors will have no recourse to the principals and responsible officers of the debtor in most cases, there are exceptions. You should consult a highly qualified bankruptcy lawyer to consider this and many other issues that can arise in a Chapter 7 business case.