Chapter 7 vs. Chapter 11 Bankruptcy: Which Applies to You?

Chapter 7 is liquidation: a trustee sells property you can't protect, pays creditors, and an individual's discharge usually comes within months. Chapter 11 is reorganization: you stay in control and repay creditors under a court-approved plan. Small businesses can use a faster track called Subchapter V, and individuals can file Chapter 11 when their debts exceed Chapter 13's limits.

This article is general legal information, not legal advice. Laws vary by state and situation, and reading it does not create an attorney-client relationship. For advice about your case, talk to a licensed attorney.

Key takeaways

• Only individuals get a Chapter 7 discharge. A corporation or partnership in Chapter 7 has its assets sold and keeps its leftover debts.
• In Chapter 11 you usually stay in charge as the "debtor in possession" and propose a plan that creditors vote on and the court must confirm.
• Court filing fees in 2026 are $338 for Chapter 7 and $1,738 for Chapter 11.
• Subchapter V is open to business debtors with up to $3,424,000 in qualifying debts. A bill that would raise it to $7,500,000 passed Congress in September 2026 and covers only cases filed once it becomes law.
• Individuals whose debts exceed Chapter 13's limits (under $526,700 unsecured and under $1,580,125 secured, since April 1, 2025) can file Chapter 11.

Liquidation or reorganization: the basic split

In Chapter 7, a trustee sells your nonexempt property and pays unsecured creditors from the proceeds. Anything an exemption covers stays with you. The meeting of creditors comes 21 to 40 days after filing, and an individual's discharge is generally issued 60 to 90 days after the first date set for that meeting. If your debts are mostly consumer debts, you also face the means test in 11 U.S.C. §707(b).

A business can file Chapter 7, but it gets no fresh start: the trustee sells what the company owns, creditors split the proceeds, and the remaining debts aren't discharged. If the goal is to keep the doors open, Chapter 7 is the wrong tool.

Chapter 11 runs the other way. When you file, you become the "debtor in possession": you keep your property, keep running the business, and take on most of a trustee's duties. You then propose a plan of reorganization that says how each group of creditors will be paid, usually over time. In a standard case only you may file a plan for the first 120 days (180 days for a small business that doesn't elect Subchapter V), and extensions can't push the 120-day period past 18 months.

Creditors get a real voice. The U.S. Trustee appoints a committee of unsecured creditors, ordinarily those holding the seven largest claims, and the court must approve a disclosure statement before anyone votes. A class accepts the plan when holders of at least two-thirds of the dollars and more than half of the claims in that class vote yes. Any creditor whose claim the plan changes, and who doesn't accept, must still get at least what a Chapter 7 liquidation would have paid it (11 U.S.C. §1129(a)(7)).

Our complete guide to how bankruptcy works covers the filing steps and which debts survive.

Chapter 7, Chapter 11 and Subchapter V side by side

	Chapter 7	Standard Chapter 11	Subchapter V
Who controls the property	A trustee, who sells nonexempt property	You, as debtor in possession	You, with a trustee monitoring
Court filing fees	$338 ($245 filing, $78 administrative, $15 trustee surcharge)	$1,738 ($1,167 filing, $571 administrative)	$1,738
Quarterly U.S. Trustee fee	None	$250 to $250,000 a quarter, based on disbursements	None
Plan	None	Only you may file one for the first 120 days	Only you, within 90 days
If an unsecured class votes no	Not applicable	Owners generally can't keep their stake unless that class is paid in full (§1129(b)); individuals get a limited exception	The court may still confirm a plan that commits all projected disposable income for 3 to 5 years
Individual's discharge	Generally 60 to 90 days after the first meeting date	After all plan payments, unless the court orders otherwise	At confirmation if creditors accept; otherwise after 3 to 5 years of payments

The quarterly fee schedule took effect April 1, 2026 and runs through December 31, 2030. Once quarterly disbursements reach $62,625, the fee becomes a percentage of what you pay out (0.4 or 0.9 percent) until it hits the $250,000 cap.

## Subchapter V: the small business route

Congress added Subchapter V to Chapter 11 in the Small Business Reorganization Act of 2019. It applies only if an eligible debtor elects it (11 U.S.C. §103(i)).

Who qualifies

You must be engaged in business or commercial activity, and on the filing date your noncontingent, liquidated debts, secured and unsecured combined, can't exceed $3,424,000. Debts owed to affiliates or insiders don't count, and at least half of the counted debt must come from the business. That figure has applied since April 1, 2025, after an inflation adjustment to the "small business debtor" definition in 11 U.S.C. §101(51D). Debtors whose primary activity is owning single asset real estate are excluded, as are corporations that file reports with the SEC and their affiliates. An individual in business, such as a sole proprietor, can elect Subchapter V on the same terms.

The limit may change. The Bankruptcy Threshold Adjustment Act (H.R. 7730) passed the House on September 16, 2026 and the Senate on September 28. It would raise the limit to $7,500,000, but only for cases filed on or after the day it becomes law, and as of the end of October 2026 the official bill record showed no signature. Look up H.R. 7730 on Congress.gov before relying on either number, because if your debts fall between the two, your filing date could decide whether you qualify.

How it differs from a standard case

A trustee is appointed in every Subchapter V case, but you keep running the business. The trustee monitors the case, appears at key hearings and helps you and your creditors reach an agreed plan. There's no creditors' committee or disclosure statement unless the court orders one for cause, and no quarterly U.S. Trustee fees. Your plan must include a short history of the business, a liquidation analysis and payment projections.

Two rules give owners more room. The absolute priority rule doesn't apply: if creditors won't accept the plan, the court can still confirm it if it's fair and equitable, which includes committing all your projected disposable income to payments for three years, or up to five if the court sets a longer period (11 U.S.C. §1191). And if you borrowed against your home mainly for the business rather than to buy it, the plan can modify that mortgage (§1190(3)). A standard Chapter 11 plan generally can't change a loan secured only by your principal residence.

The Subchapter V clock

Filing a voluntary petition is itself the "order for relief" (11 U.S.C. §301(b)), so the clock starts the day you file.

Step	Deadline	Statute
Your report on efforts toward a consensual plan	At least 14 days before the status conference	§1188(c)
Status conference	No later than day 60	§1188(a)
Plan filed	No later than day 90	§1189(b)
Payments if confirmed without creditor acceptance	3 years, or up to 5 if the court sets it	§1191(c)

If the court sets the status conference on day 60, your report is due by day 46 and your plan by day 90. The conference and plan deadlines can be extended only for circumstances you shouldn't justly be held accountable for.

When an individual files Chapter 11 instead of 7 or 13

For most individuals the real choice is Chapter 7 or Chapter 13, and our guide to Chapter 7 vs. Chapter 13 covers it. Chapter 11 comes in when neither fits.

One reason is debt above Chapter 13's limits. Chapter 13 is open only to individuals with regular income whose unsecured debts are under $526,700 and whose secured debts are under $1,580,125 (since April 1, 2025). H.R. 7730 would replace both caps with a single limit of $2,750,000 in noncontingent, liquidated debts, again only for cases filed on or after the day it becomes law.

The other is that Chapter 7 doesn't work. If your debts are mainly consumer debts and you fail the means test, the court can dismiss your Chapter 7 case or, with your consent, convert it to Chapter 11 or 13. And if you own property a Chapter 7 trustee would sell, such as real estate with equity beyond your exemptions, reorganizing may let you keep it while paying creditors at least what a sale would have brought them. If most of your debt comes from a business you run, look at Subchapter V first.

Chapter 11 also works differently for an individual. Property you acquire and money you earn after filing become part of the bankruptcy estate (11 U.S.C. §1115). If an unsecured creditor objects, your plan must pay that creditor in full or commit at least your projected disposable income over five years or the plan's term, whichever is longer (§1129(a)(15)). The discharge usually comes only after you finish every plan payment (§1141(d)(5)), and debts excepted from discharge under §523, such as child support, alimony and certain taxes, survive. As in any chapter, you need credit counseling from an approved agency within the 180 days before filing (§109(h)).

## Why your state's exemptions still matter in Chapter 11

Exemptions decide what a Chapter 7 trustee can sell. Because a Chapter 11 creditor who rejects your plan must still get its Chapter 7 liquidation value, they also set the floor for what your plan must pay. The more of your property is exempt, the lower that floor.

Which exemptions you can use depends on your state. Federal law has its own list in 11 U.S.C. §522(d), including a homestead exemption of $31,575 since April 1, 2025, but states can opt out of it. Florida did: under Florida Statutes §222.20, residents can't claim the federal exemptions. Michigan's statute, MCL 600.5451, instead sets out a state list that a filer can use as an alternative to the federal exemptions. If you use state exemptions, homestead equity acquired in the 1,215 days before filing is generally capped at $214,000 (since April 1, 2025), whatever your state allows (§522(p)). Other states set their own rules, so check your state's exemption statute.

When to talk to a lawyer

Chapter 11 runs on tight deadlines, and choices made before filing are hard to undo. Talk to a bankruptcy lawyer soon if:

• Your business has employees, a lease or equipment loans you want to keep, and you're weighing Chapter 11 against closing in Chapter 7.
• Your qualifying debts are near or above $3,424,000 but under $7,500,000, so your filing date relative to H.R. 7730 could matter.
• Your personal debts exceed Chapter 13's limits, or you failed the means test.
• You borrowed against your home to fund the business.
• A creditor has sued you, or a foreclosure sale or levy is scheduled.

You can find a bankruptcy lawyer near you. If you haven't ruled out Chapter 7 or Chapter 13 yet, our Bankruptcy Qualification Checker gives a quick first read.

Frequently asked questions

Can an individual file Chapter 11 bankruptcy?

Yes. Anyone who may file Chapter 7, except stockbrokers and commodity brokers, may file Chapter 11 (11 U.S.C. §109(d)). It mainly makes sense when your debts exceed Chapter 13's limits, which since April 1, 2025 are under $526,700 unsecured and under $1,580,125 secured. It costs more than Chapter 7 or 13: filing fees are $1,738, quarterly U.S. Trustee fees apply outside Subchapter V, and the discharge usually waits until plan payments are done.

What is the Subchapter V debt limit in 2026?

For cases filed now, it is $3,424,000 in noncontingent, liquidated debts, secured and unsecured combined, excluding debts owed to affiliates or insiders, with at least half from business activity. That amount took effect April 1, 2025. Congress passed H.R. 7730 in September 2026 to raise it to $7,500,000 for cases filed on or after the day it becomes law, so check the bill's status on Congress.gov.

Does a business get a discharge in Chapter 7?

No. Only individuals receive a Chapter 7 discharge. When a corporation or partnership files Chapter 7, the trustee sells its assets and pays creditors from the proceeds, but the company's remaining debts aren't discharged. A business that wants to keep operating and restructure its debts generally needs Chapter 11, including Subchapter V if it qualifies.

Can you convert Chapter 11 to Chapter 7?

Usually. You can convert your own case unless you're no longer the debtor in possession, the case began as involuntary, or someone else converted it to Chapter 11 (11 U.S.C. §1112(a)). A creditor can also ask the court to convert or dismiss for cause, but the court can't force a farmer, or a corporation that isn't a moneyed, business or commercial corporation, into Chapter 7 unless the debtor asks.

How much more does Chapter 11 cost than Chapter 7?

Court filing fees are $1,738 for Chapter 11 and $338 for Chapter 7. Outside Subchapter V, a Chapter 11 debtor also pays the U.S. Trustee a quarterly fee until the case is closed, converted or dismissed: from $250 to $250,000 a quarter under the schedule that began April 1, 2026. Lawyers' and other professionals' fees come on top and vary by case, so ask for a written estimate.