Chapter 7 vs. Chapter 11 Bankruptcy
There are two types of bankruptcies that businesses can file for, Chapter 7 and Chapter 11. Both have their own advantages and disadvantages, so it's important to understand the difference between the two before making a decision.
Chapter 7 bankruptcy is also known as liquidation bankruptcy. This is because in a Chapter 7 bankruptcy, the business' assets are sold off in order to pay back creditors. The business is then dissolved and no longer exists. However, this type of bankruptcy does not allow the business to reorganize or restructure its debts.
Chapter 11 bankruptcy, on the other hand, is known as reorganization bankruptcy. In a Chapter 11 bankruptcy, the business is able to keep operating while it restructures its debts. This means that the business can still exist after the bankruptcy process is complete.
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