What’s the difference between chapter 11 and chapter 13?


Ace Mechanic
I have a buddy who wants to take his business elsewhere, he has been in business for several decades but is now way over his head. He has moved all his suppliers outstanding balances to company credit cards and personal loans secured by his business. Will chapter 13 allow him to take most of his depreciated equipment, and not have to pay any of his bussiness debt? Then open under a new name free and clear? Or would Chapter 11 make him keep the business as is but have to repay all his debt over time?


Well-Known Member
What's their income? If their income and unsecured debt is over $336,900, and secured debts are over approx $1 million, Chapter 13 will not work. Chapter 13 is more for individuals, and/or those who have unincorporated businesses. I.E. most fab shops who are sole proprietors. They can repay over a time period of 3-5 years, and is often used when individuals are looking to avoid foreclosures and/or repossessions.

You could also do as GM did. File Chapter 11, form a new company and sell the assets of the bad company to it, and leave the rest in Chapter 11 under the old company. This would have to be approved by the court, of course.

Call a lawyer, I'm just a "kid". Good luck.