Chapter 11 Restructuring v. Chapter 13 Liquidation

Know thy difference folks, lest the semantic tyrants trick you into bailing out the bad actors.  GM went through a Chapter 11 restructuring or failure but was deemed to be bailed out.  My kind of bailouts.

What Is Chapter 11?

Chapter 11 is a form of bankruptcy that involves a reorganization of a debtor’s business affairs, debts, and assets. Named after the U.S. bankruptcy code 11, corporations generally file Chapter 11 if they require time to restructure their debts. This version of bankruptcy gives the debtor a fresh start. However, the terms are subject to the debtor’s fulfillment of his obligations under the plan of reorganization. – Investopedia

What is Chapter 13

Chapter 13 refers to a U.S. bankruptcy proceeding in which the debtor undertakes a reorganization of his or her finances under the supervision and approval of the courts. When an individual, married couple or business is laden by debt, they can file for Chapter 13 bankruptcy. As part of the financial reorganization of Chapter 13, the debtor must submit and follow through with a plan to repay outstanding creditors within three to five years. In most circumstances, the repayment plan must provide a substantial payback to creditors – at least equal to what they would receive under other forms of bankruptcy – and it must, if needed, use 100% of the debtor’s income for repayment.  – Investopedia

 

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4 Responses to Chapter 11 Restructuring v. Chapter 13 Liquidation

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