Chapter 11 vs. Chapter 13 Bankruptcy: What’s the Difference?


Attorneys from the office of Bournakis & Mitchell, P.C. offer this guide about “Chapter 11 vs. Chapter 13 Bankruptcy: What’s the Difference?” Call for advice.

Is there a Difference Between Bankruptcy Under Chapter 11 and Chapter 13?

If you have significant debt problems and want to seek bankruptcy protection without having to liquidate your assets, you have two options under the bankruptcy code, filing under Chapter 13 or Chapter 11.

Chapter 13 bankruptcy is also known as the wage earner’s bankruptcy. It allows individuals with secured or unsecured debt who receive a stable income to adjust their debts and develop a plan to repay them in three to five years.

Similarly, Chapter 11 bankruptcy allows the applicant, which may be a legal entity such as a company or an individual small business owner, to reorganize their unsecured or secured debts in a reorganization plan and pay them off over a long period.

The purpose of these forms of bankruptcy is not just to ensure that creditors receive their payment but to do so with minimal disruption to the debtor. If you stick with the plan, both processes offer a slow but steady route to debt freedom.

 However, despite their similarities, these forms of bankruptcy have several notable differences in their purpose, how they work, duration, and the classes of persons who can apply for either.

Understanding the areas of variance helps you decide which is appropriate for you. Please keep reading to learn more as we explore key areas of divergence between both procedures.

Chapter 11 vs Chapter 13 Bankruptcy: Exploring Some Areas of Difference

Some of the differences between these two forms of bankruptcy are highlighted as follows:


Chapter 13 bankruptcy applies to individuals who receive a regular salary, including those who run their own businesses.

To be eligible for this form of bankruptcy, the sum of your secured and unsecured debts should be, at most, $2,490,925. Additionally, you would be ineligible for bankruptcy under this chapter if a previous bankruptcy petition against you was dismissed within the last 180 days due to your failure to appear in court.

The eligibility requirements for Chapter 11 bankruptcy are different. Unlike the case with Chapter 13, this chapter applies to business entities, corporations, and individual small business owners. Application for bankruptcy under this chapter may be made by the company or small business debtor voluntarily or by their creditors.


Both bankruptcies commence with filing a petition and payment of the stipulated filing fee. However, the procedure after filing and the amount for filing differ. Once a Chapter 11 bankruptcy is filed, the debtor becomes known as the debtor-in-possession. This new identity allows the debtor to keep running the business while the decision of the creditors and court on the reorganization plan is pending.

The debtor-in-possession assumes the role of a trustee with all the rights and duties attached to the position until a chapter 11 bankruptcy trustee is appointed or the reorganization plan is approved.

The US trustee, in turn, plays a supervisory role over the debtor in possession to ensure that the business is operating properly and that the necessary paperwork is filed in court periodically.

In contrast, there is no business to consider in Chapter 13, so the debtor does not assume the role of a trustee. Instead, they are required to begin making payments to the Chapter 13 bankruptcy trustee within 30 days after filing the petition, regardless of whether the repayment plan has been approved.


Unsecured Creditors

Under a Chapter 11 bankruptcy, unsecured creditors play a significant role as members of creditors’ committees. Creditors committees are organized by the US trustee and generally consist of the seven largest unsecured creditors owed by the debtor.

The committee performs several functions, including investigating the debtor’s operation of the business, consulting with the debtor on the case administration, and participating in the formulation of the reorganization plan.

In contrast, unsecured creditors do not play such an active, official role in a Chapter 13 bankruptcy. In fact, unsecured creditors may not receive their full payment under a Chapter 13 repayment plan. The law only requires that they receive at least as much as they would have gotten if the debtor’s assets were liquidated.



A Chapter 13 bankruptcy and repayment period lasts for between three to five years. The specific duration is determined by the debtor’s income and the applicable state median. Generally, the rule is that if the debtor’s monthly disposable income exceeds the state median figure, the repayment plan will last for five years. If the debtor’s income is less than the approved median, then the plan would be for three years, although the period can be extended via an order from the bankruptcy court.

In contrast, a Chapter 11 bankruptcy can last for many years as the law does not provide a specific time limit for its conclusion. However, the court, creditors, trustee, or any other party may act to ensure the timely completion of the case.


Are There Any Similarities Between Chapter 11 and Chapter 13 Bankruptcies?

There are lots of similarities between the two forms of bankruptcy. The primary area of convergence for both forms of bankruptcy is that they are meant to help debtors repay creditors over a long period without having to liquidate their assets.

Another area where both processes are identical is in the pre-filing requirements for individual applicants. In both cases, applicants have to undergo and complete credit counseling within 180 days before the petition is filed.

There are other similarities between these two processes. However, the differences highlighted in the previous section are proof that these two forms of bankruptcy are not the same and cannot be used interchangeably.

How Bankruptcy Attorneys Can Help You

Before filing for bankruptcy, it is important to seek professional help and advice from a bankruptcy attorney. There are several bankruptcy processes, including the two discussed here, and their purposes and outcomes differ significantly. Bankruptcy lawyers in Dalton can help you determine your eligibility for the bankruptcy process and identify the appropriate process for you.

They can also help prepare the bankruptcy documentation on your behalf per the bankruptcy laws and regulations and represent you throughout the duration of the bankruptcy.

Getting a bankruptcy attorney to act for you saves you from the stress of worrying about the legal requirements and implications of the process, in addition to your financial troubles. If you’re concerned about the cost implications, you can start by working with a law firm that offers free consultation services. That way, you might be able to get an initial case assessment before you commit.

If you need further clarification on Chapter 13 bankruptcy and whether it is right for you, or if you’d like to preserve your assets during bankruptcy, contact us at Bournakis & Mitchell, P.C. We are a firm of experienced Bankruptcy Lawyers in Cartersville, Georgia, and we can provide the legal guidance you need at such a critical time. Get in touch with us to schedule a free consultation and receive the assistance and representation you need to live debt free.

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