US bankruptcy 'chapters' serve different people and goals. Chapter 7 liquidates, Chapter 13 reorganises a person's debts and Chapter 11 reorganises businesses. Choosing correctly matters. Here is the clear comparison.
Chapter 7 (Liquidation)
For individuals with limited income: non-exempt assets are sold, most unsecured debts are discharged. Fast (months) but requires passing a means test.
Chapter 13 (Reorganisation)
For individuals with regular income: you keep assets and pay a repayment plan (3–5 years). Good if you want to keep a home/car.
Chapter 11 (Business Reorganisation)
For businesses (and some individuals): the entity keeps operating under a court-approved restructuring plan. Complex, costly, used by large firms.
How to Choose
- Little income, no assets to protect → Chapter 7.
- Steady income, want to keep assets → Chapter 13.
- Business needs to restructure → Chapter 11.
FAQ
Which chapter wipes debts fastest?
Chapter 7 usually discharges in a few months.
Can I keep my house in bankruptcy?
Often, via Chapter 13 (payments) or exemptions in Chapter 7.
Related: Bankruptcy and Divorce and Mortgage After Bankruptcy.