An overview of Chapter 7 bankruptcy 

Chapter 7 bankruptcy allows an eligible individual to eliminate many debts without a repayment plan. A trustee reviews the debtor’s finances and may sell property that is not protected by exemptions to pay creditors. This is why Chapter 7 is called “liquidation bankruptcy.”

1. Who can file?

Individuals, married couples filing jointly, and business entities may qualify. Chapter 7 has no maximum debt limit.

However, only individuals receive a Chapter 7 discharge. A corporation or LLC may file to liquidate its assets, but its filing does not discharge an owner’s personal guarantees. 11 U.S.C. §§ 109(b), 727(a)(1).

2. What is the means test?

For individuals with primarily consumer debts, the means test evaluates income and allowable expenses to determine whether Chapter 7 relief would be presumed abusive.

• Below-median income generally avoids the additional means-test expense calculation.

• Above-median income does not automatically disqualify someone; allowable deductions may still permit qualification.

• Individuals whose debts are primarily business or other nonconsumer debts generally are exempt from the § 707(b) means test. Other grounds for dismissal still may apply.

3. Does the debtor lose everything?

No. Exemptions protect certain property or amounts of equity. The trustee generally sells nonexempt property only when doing so would produce a meaningful benefit for creditors.

Many individual cases are “no-asset” cases, meaning no property is distributed to unsecured creditors. Nevertheless, valuable nonexempt assets can be sold.

4. Which debts can be eliminated?

Ordinary credit-card balances, medical bills, unsecured loans, and many business debts generally can be discharged.

Common exceptions include:

• Child support and spousal support.

• Many tax debts.

• Most student loans, unless the required undue-hardship determination is obtained.

• Certain criminal fines and restitution.

• Certain debts involving fraud or other misconduct if the claimant files an adversary complaint and wins at trial .

Dischargeability depends on the particular debt and applicable statutory requirements. 11 U.S.C. § 523.

5. What happens to a house or car loan?

Discharging personal liability usually does not remove the lender’s lien. A creditor may retain the right to foreclose or repossess its collateral.

Keeping a house or vehicle therefore requires consideration of both the debtor’s protected equity and the secured lender’s rights. Chapter 7 generally does not provide a repayment plan to catch up mortgage arrears; Chapter 13 can provide that opportunity.

6. What does the process involve?

The individual ordinarily:

1. Completes approved credit counseling before filing.

2. Files disclosures of assets, debts, income, expenses, and financial transactions.

3. Provides supporting records and attends the trustee’s § 341 meeting.

4. Completes the required financial-management course.

5. Receives a discharge if eligible and no successful objection prevents it.

Concealing assets, making false statements, or failing to cooperate can result in denial of discharge.

An overview of Chapter 11 Small Business Reorganzation Bankruptcy (not Subchapter V)

A Chapter 11 “small business case” is a reorganization proceeding for a qualifying small business debtor that does not elect Subchapter V. It allows the debtor to restructure debts and usually continue operating, but it retains the traditional Chapter 11 rules for creditor voting and ownership retention.

The statutory definition appears in 11 U.S.C. §§ 101(51C)–(51D).

1. Who qualifies?

The current published debt ceiling is $3,424,000 in qualifying noncontingent, liquidated secured and unsecured debt, excluding debts owed to affiliates or insiders. Generally:

• The debtor must engage in commercial or business activities.

• At least 50% of qualifying debt must arise from those activities.

• Individuals and business entities may qualify.

• Single asset real estate debtors and certain publicly traded or affiliated debtors are excluded.

A business exceeding the applicable limit may still qualify for ordinary Chapter 11, but would not receive this particular small business designation.

2. Who operates the business?

The debtor ordinarily remains in possession and continues operating. A case trustee is not automatically appointed. The U.S. Trustee monitors financial reporting and compliance.

The debtor must provide financial statements, tax information, and operating reports. A creditors’ committee ordinarily is not appointed unless the court orders one for cause.

3. What are the deadlines?

These cases have an accelerated schedule:

Debtor’s exclusive right to file a plan First 180 days after the order for relief.

Filing the plan and disclosure statement, if required Within 300 days after the order for relief.

Confirmation of a qualifying plan Within 45 days after the plan is filed.

In a voluntary case, the filing ordinarily constitutes the order for relief. 11 U.S.C. §§ 1121(e), 1129(e).

Extensions require a showing that confirmation is more likely than not within a reasonable time, a new deadline, and an extension order signed before the existing deadline expires. These are not routine extensions.

4. Is a disclosure statement required?

Generally, creditors must receive adequate information before voting. However, under § 1125(f), the court may:

• Find that the plan itself supplies adequate information.

• Approve a disclosure statement conditionally.

• Combine the final disclosure-statement hearing with the confirmation hearing.

These measures can reduce procedural expense.

5. Must creditors approve the plan?

Traditional Chapter 11 confirmation requirements apply. A plan must satisfy requirements including good faith, feasibility, and the liquidation-value protection for dissenting creditors.

If a class is impaired, ordinarily at least one impaired class must accept, excluding insider votes. The court may confirm over another class’s rejection through “cramdown” under § 1129(b), provided the remaining requirements are met.

6. Can the owner keep the business while paying unsecured creditors less than 100%?

Possibly, but creditor acceptance becomes particularly important.

If an unsecured class rejects the plan, the absolute priority rule generally prevents existing owners from retaining ownership on account of their existing interests unless that class is paid in full. Potential exceptions or new-value arrangements require careful analysis.

For example, an LLC owner proposing to retain the company while paying unsecured creditors 20% may succeed with the necessary creditor acceptance. If the unsecured class rejects, ownership retention becomes a major confirmation obstacle.

7. How does it differ from Subchapter V?

Traditional small business case Subchapter V

Case trustee Not automatically appointed. 

Plan filing Generally within 300 days. 

Competing plans. Possible after exclusivity ends. 

Confirmation: Traditional § 1129 requirements.

Owner retaining equity over unsecured-class opposition: Absolute priority rule generally applies. More flexible

U.S. Trustee quarterly fees Required.

The central practical issue is whether the business can fund a feasible plan and obtain sufficient creditor support while meeting the accelerated deadlines.

An overview of Chapter 11 Subchapter V Small Business bankruptcy. 

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Chapter 11, Subchapter V is a streamlined bankruptcy reorganization procedure for qualifying small businesses and individuals with business debt. It allows the debtor to restructure debts, usually continue operating, and potentially pay unsecured creditors less than the full amount owed.

It is governed principally by 11 U.S.C. §§ 1181–1195 and applies in California as federal bankruptcy law.

1. Who qualifies?

As of October 17, 2026, the debt limit is $3,424,000. Generally, the debtor must:

Be engaged in commercial or business activities.

Have qualifying noncontingent, liquidated secured and unsecured debts totaling no more than $3,424,000, excluding debts owed to insiders or affiliates.

Have at least 50% of those debts arising from commercial or business activities.

Satisfy restrictions concerning affiliated debtors and publicly traded companies.

An eligible debtor may be an individual, sole proprietor, LLC, corporation, or partnership. A debtor whose primary activity is owning “single asset real estate,” as defined by the Bankruptcy Code, is excluded. Owning real estate alone does not automatically trigger that exclusion.

2. What happens after filing?

Filing generally triggers the automatic stay, stopping most collection lawsuits, judgment enforcement, repossessions, and foreclosures against the debtor or estate property, subject to statutory exceptions and court orders.

The debtor normally remains in control of the business as the debtor in possession. A Subchapter V trustee is appointed to help facilitate a plan and oversee the process; appointment ordinarily does not mean the trustee takes over daily operations.

3. How does the repayment plan work?

Only the debtor may propose a plan. The plan ordinarily must be filed within 90 days after the order for relief—usually the filing date in a voluntary case. That is the deadline to file the plan, rather than to obtain its approval. Extensions are limited. 11 U.S.C. § 1189.

The plan explains how creditors will be treated and how payments will be funded. Depending on applicable requirements, it may restructure secured debt, cure arrears, and provide partial payment of unsecured claims.

4. Must creditors agree?

No. Under § 1191(b), the court may approve a plan over creditor opposition if the statutory requirements are met.

For this type of contested confirmation, the plan generally must commit the debtor’s projected disposable income—or equivalent value—for three to five years. The plan must also satisfy requirements concerning feasibility, fair treatment, and protection of secured creditors.

A major advantage is that owners may retain their ownership interests even when unsecured creditors are not paid in full, provided the applicable confirmation requirements are satisfied. This relaxes the traditional Chapter 11 absolute priority rule.

5. Why use Subchapter V instead of ordinary Chapter 11?

It generally offers:

A faster process.

No separate disclosure statement unless the court orders one.

No creditors’ committee unless ordered for cause.

No U.S. Trustee quarterly fees.

Greater ability to confirm a plan while preserving the owners’ interests.

Attorney fees, trustee compensation, accounting expenses, and other case costs still apply.

6. When are debts discharged?

For a plan confirmed over creditor opposition under § 1191(b), discharge generally follows completion of the payments due during the court-established three-to-five-year period. Certain debts remain excepted from discharge, and obligations payable beyond that period may continue. Different discharge rules apply to consensually confirmed plans. 11 U.S.C. § 1192.

For example, a business with substantial unsecured debt but enough income to fund a feasible plan may use Subchapter V to continue operating, pay creditors over time, and preserve the owner’s interest. The practical question is whether the business can generate enough cash to cover current operating expenses and the required plan payments.

An overview of Chapter 13 individual Reorganization Bankruptcy. 

Chapter 13 bankruptcy allows an individual with regular income to repay all or part of their debts through a court-approved plan, usually lasting three to five years, while keeping property. It is often used to catch up on mortgage arrears, protect assets, or obtain debt relief when Chapter 7 is unsuitable.

1. Who qualifies?

Chapter 13 is available to individuals, including self-employed people and sole proprietors. Corporations and LLCs cannot file Chapter 13.

Under the current limits, the debtor must have:

Debt categoryEligibility limit

Noncontingent, liquidated unsecured debtLess than $526,700

Noncontingent, liquidated secured debtLess than $1,580,125

These are separate limits, measured when the case is filed. The debtor also needs sufficiently regular income to fund a feasible plan. 11 U.S.C. § 109(e).

2. How does the plan work?

The debtor makes payments to a Chapter 13 trustee, who distributes money to creditors. Some ongoing obligations may be paid directly, depending on the plan and local requirements.

Payments generally begin within 30 days, before the court approves the plan. Below-median-income debtors generally have three-year plans, subject to extension for cause; above-median-income debtors generally have five-year plans.

3. Must every creditor be paid in full?

No. Unsecured creditors may receive partial payment. However, the plan must satisfy applicable requirements concerning:

• Projected disposable income: generally, available income after allowable expenses.

• Liquidation value: unsecured creditors must receive at least what they would receive in Chapter 7.

• Required debt treatment: certain secured and priority claims require specified payments.

Therefore, the payment depends on income, expenses, assets, and debt types—not simply the total debt divided by 60. 11 U.S.C. § 1325.

4. Can Chapter 13 save a home from foreclosure?

It can provide an opportunity to cure mortgage arrears over the plan period while maintaining current mortgage payments. Filing generally stops foreclosure temporarily through the automatic stay, subject to exceptions and relief granted by the court.

For example, $30,000 in arrears spread over 60 months equals $500 monthly toward the arrears alone. The debtor must also budget for ongoing mortgage payments, trustee fees, and other required plan payments.

5. What debts remain after completion?

After completing the plan and satisfying discharge requirements, the debtor generally receives a discharge of eligible remaining debts. Common exceptions include:

• Child support and spousal support.

• Certain taxes.

• Most student loans absent an applicable discharge determination.

• Certain criminal fines and restitution.

• Long-term obligations continuing beyond the plan, such as a home mortgage.

A discharge generally does not eliminate a valid lien unless it has been properly avoided or otherwise addressed. 11 U.S.C. § 1328.

6. What if the debtor cannot finish the plan?

Depending on the circumstances, options may include modifying payments, converting to Chapter 7 if eligible, or seeking a limited hardship discharge. Otherwise, the case may be dismissed, allowing collection to resume.

Compared with Chapter 7, Chapter 13 provides time to repay debts and protect property, but requires sustained ability to make plan payments.