Corporate Bankruptcies: The Relationship between Chaper 7 & Chapter 11 Bankruptcy

There is no direct relationship between Chapter 7 and Chapter 11. But when it comes to corporate bankruptcies there can set a relationship between the two bipolar Chapters.
The U.S. Security and Exchange Commission (SEC) define Chapter 7 as taking the business out of its all operations and turning it into an asset. The asset is sale off through an appointed committee and the one, investors or creditors, who take the least risks, are paid first. Chapter 11, while on the contrary, keeps the business in the running state and allowing it to pay the creditors by re-planning or rephrasing its financial acts.


There are instances that show the bankrupted company has made a successful comeback after filing under Chapter 11. It has done by re-planning their operations with the help of court appointed committee or trustee. But most of the time, and often, this conversion from being bankrupted to a profitable sector is not success. The company then has to turn to Chapter 7 for being free from the shackles of credits. And here lies the under breath relationship between the two Chapters.
When the company failed to resurface itself by Chapter 11 it can turn to Chapter 7. The flexibility of bankruptcies rule has lead to this transformation and also helped the company to pay off their debt. Thus, though, Eleven and Seven are dissimilar in many facts but ultimately they are acting as the savior in one form or another.  Call Firebaugh and Andrews today for your free consultation 734-722-2229