Bankruptcy Basics: A Primer

March 22, 2018 – October 12, 2022 R45137

Bankruptcy Basics: A Primer
Updated October 12, 2022
Congressional Research Service
https://crsreports.congress.gov
R45137

Bankruptcy Basics: A Primer

Summary
U.S. bankruptcy law has two central aims. First, it seeks to relieve debtors of certain financial
obligations they are unable to satisfy by providing them with a “fresh start” from those
difficulties. Second, bankruptcy law attempts to preserve the countervailing interests of creditors
and other stakeholders by maximizing total creditor return on debts in an orderly and efficient
fashion. Congress and the courts have established a complex system of statutes, procedural rules,
and judicial precedents intended to balance these competing interests.
Various types of debtors—from individual consumers with modest incomes to the largest
multinational corporations—may potentially encounter difficulty repaying their debts. To
accommodate the differing needs of such debtors, the Bankruptcy Code—which is the primary
source of bankruptcy law in the United States—contains a variety of “Chapters” that create
several different forms of bankruptcy proceedings. Although the end goal of each of those
proceedings is to balance the conflicting interests of debtors, creditors, and other stakeholders,
each Chapter has its own procedures, eligibility requirements, and forms of relief. Whereas some
Chapters aim to liquidate the debtor, others attempt to reorganize the debtor so that it may
continue to operate as a going concern, while still others adjust the debtor’s debts.
This report serves as a primer for Members and their staffs on the basics of U.S. bankruptcy law.
The report provides a brief overview of the most essential concepts necessary for an informed
understanding of the U.S. bankruptcy system, including
 the competing policies underlying the Bankruptcy Code;
 the sources of bankruptcy law;
 the organization of the Bankruptcy Code;
 the key players in a bankruptcy proceeding;
 the initiation of a bankruptcy case;
 the “automatic stay” of creditor actions against the debtor;
 the various types of proceedings established by different Chapters of the
Bankruptcy Code, as well as the differences between those proceedings; and
 the “discharge” of debt.

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he U.S. Constitution grants Congress the authority “to establish . . . uniform Laws on
the subject of Bankruptcies throughout the United States.”1 Exercising that authority,
Congress has enacted the “Bankruptcy Code”2 which, along with other sources of law,3
T governs bankruptcies in the United States. The Bankruptcy Code generally attempts to
balance two competing policy concerns.4 On the one hand, bankruptcy aims to give
honest debtors5 a “fresh start”—that is, to grant debtors relief from certain debts they cannot
repay—so that they may “reorder their affairs, make peace with their creditors, and enjoy ‘a new
opportunity in life with a clear field for future effort, unhampered by the pressure and
discouragement of preexisting debt.’”6 This fresh start generally comes in the form of a
“discharge”7 of many forms of the debtor’s debts, which consists of “a legal right not to pay” the
discharged debts as well as “safeguards against harassment by the creditor”8 whose debt is
discharged.9 At the same time, however, the bankruptcy system also attempts to maximize total
creditor return on debts by distributing a subset of the debtor’s assets or income to creditors in an
orderly, equitable, and efficient fashion.10 Thus, “Congress and the judiciary are constantly
striving to achieve a wise balance between” offering “a fresh start for debtors” and ensuring
“fairness to creditors.”11 To that end, Congress has frequently amended the Bankruptcy Code
since its initial enactment in 1978 to recalibrate that balance.12
Because hundreds of thousands of bankruptcy filings are made every year,13 bankruptcy law is
vitally important to Congress and the nation as a whole. This report provides a primer for
Members and their staffs on the basics of U.S. bankruptcy law. In so doing, the report provides a
broad overview14 of the most essential concepts necessary for an informed understanding of the
U.S. bankruptcy system, including

1 U.S. CONST. art. I, § 8, cl. 4.
2 11 U.S.C. §§ 101-1532. Appendix A contains a glossary that defines all terms that are highlighted in bold in this
report.
3 See infra “The Bankruptcy Code and Other Sources of Bankruptcy Law.”
4 See, e.g., Flores v. Yarnell (In re Flores), Nos. NV-09-1263-DJuP, 08-21047-MKN, 2010 WL 6259989, at *6 n.14
(B.A.P. 9th Cir. Apr. 6, 2010).
5 See infra “The Key Players in a Bankruptcy Case” and Appendix A for the definition of “debtor.”
6 E.g., Grogan v. Garner, 498 U.S. 279, 286 (1991) (quoting Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934)).
7 See infra “Discharge.”
8 See infra “The Key Players in a Bankruptcy Case” and Appendix A for the definition of “creditor.”
9 In re Walker, 180 B.R. 834, 840 (Bankr. W.D. La. 1995). Accord, e.g., 11 U.S.C. § 524(a) (describing the legal effect
of a bankruptcy discharge).
10 E.g., Hoseman v. Weinschneider, 322 F.3d 468, 475 (7th Cir. 2003); Schaffer v. CC Invs., LDC, 286 F. Supp. 2d
279, 281 (S.D.N.Y. 2003).
11 E.g., In re Harding, 423 B.R. 568, 575 (Bankr. S.D. Fla. 2010).
12 See Pamela Kohlman Webster, The Malpractice of Health Care Bankruptcy Reform, 32 LOY. L.A. L. REV. 1045,
1045 (1999).
13Admin. Office of the U.S. Courts, Bankruptcy Filings Drop 24 Percent (Feb. 11, 2022),
https://www.uscourts.gov/news/2022/02/04/bankruptcy-filings-drop-24-percent (describing “a steady decline” in
bankruptcy filings during the COVID-19 pandemic, and reporting 413,616 filings in 2021 compared to 544,463 cases
in 2020). The number of people filing for bankruptcy is higher than the number of bankruptcy filings themselves,
because spouses may file jointly. 11 U.S.C. § 302 (2012), See Pamela Foohey et al., “No Money Down” Bankruptcy,
90 S. CAL. L. REV. 1055, 1056-57 (2017) (noting roughly 819,000 bankruptcy petitions in 2015, but estimating that
over a million people filed for bankruptcy because of joint petitions).
14 This report is not intended to provide an exhaustive treatment of all bankruptcy-related topics, and it intentionally
omits more advanced concepts that are unnecessary for a basic understanding of the bankruptcy process. Well-known
treatises that analyze U.S. bankruptcy law in greater depth include HENRY J. SOMMER & RICHARD LEVIN, COLLIER ON
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 constitutional limitations on Congress’s bankruptcy power;
 the competing policies underlying the Bankruptcy Code;
 the sources of bankruptcy law;
 the organization of the Bankruptcy Code;
 the key players in a bankruptcy proceeding;
 the initiation of a bankruptcy case;
 the “automatic stay” of creditor actions against the debtor;
 the various types of proceedings established by different “Chapters” of the
Bankruptcy Code, as well as the differences between those proceedings; and
 the discharge of debt.
Key terms and concepts used in this report (marked in bold when first used) are defined in the
report’s glossary found in Appendix A. A table noting differences between the Chapters of the
Bankruptcy Code is included in Appendix B.
The Bankruptcy Clause and the Uniformity
Requirement
The Bankruptcy Clause bestows upon Congress the power to establish “uniform Laws on the
subject of Bankruptcies throughout the United States.”15 Thus, a bankruptcy statute generally must
apply uniformly to a defined class of debtors, although the Supreme Court has interpreted the
uniformity requirement to have a measure of flexibility.
In Moyses v. Hanover National Bank, the Court rejected a challenge to the constitutionality of the
Bankruptcy Act of 1898, a statute that permitted individual debtor exemptions under state laws.16
The Court held that the uniformity requirement did not require Congress to eliminate existing state
exemptions in bankruptcy laws, and that the “general operation of the law is uniform although it
may result in certain particulars [operating] differently in different States.”17
In the Regional Rail Reorganization Act Cases, the Court assessed the Regional Rail
Reorganization Act of 1973, which applied only to rail carriers operating within a defined region
of the country.18 Although the Act differentiated between regions on its face, there were no
railroad reorganizations pending outside of that region, allowing the Court to conclude that, in
practice, the statute “operate[d] uniformly upon all bankrupt railroads” in existence. In upholding
the statute, the Court also relied on the “flexibility inherent” in the Bankruptcy Clause. The Court
elaborated that the Bankruptcy Clause permits Congress to “take into account differences that
exist between different parts of the country, and to fashion legislation to resolve geographically
isolated problems.”19

BANKRUPTCY (16th ed. 2011) and WILLIAM L. NORTON JR. & WILLIAM L. NORTON, III, NORTON BANKRUPTCY LAW &
PRACTICE (3d ed. 2018).
15 U.S. CONST. art. I, § 8, cl. 4.
16 186 U.S. 181 (1902).
17 Id. at 190.
18 419 U.S. 102 (1974).
19 Id. at 158-59.
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Conversely, in Railway Labor Executives’ Association v. Gibbons, the Court struck down the
Rock Island Railroad Transition and Employee Assistance Act (RITA), in which Congress altered
the order of priority of claimants in a single railroad’s bankruptcy.20 The Court held that RITA
was neither responsive to the problems endemic to the railroad industry nor confined to a
geographic area; accordingly, it could not be construed as applying uniformly to major railroads.21
Most recently, in Siegel v. Fitzgerald,22 the Court addressed the 2017 Bankruptcy Judgeship Act,
which imposed different fee requirements for large Chapter 11 bankruptcies based on the federal
district in which a debtor filed a petition. The law imposed higher fees in districts administered by
the U.S. Trustee Program.23 The Court ruled that the Act violated the uniformity requirement
because the rate-funding disparity arose not out of a region-specific problem, like the law at issue
in the Regional Rail Reorganization Act Cases, but out of Congress’s own “arbitrary” decision to
separate the districts into two different systems. That decision to separate the districts, the Court
held, derived not from geographical needs, but from a desire of the federal districts in two states to
avoid participating in the Trustee Program.24
Taken together, this Supreme Court precedent provides that the Bankruptcy Code broadly
authorizes Congress to enact legislation on bankruptcy, subject to a uniformity requirement that
prohibits “arbitrary, disparate treatment of similarly situated debtors based on geography.”25
The Bankruptcy Code and Other Sources of
Bankruptcy Law
As noted above, the Bankruptcy Code is the primary source of bankruptcy law in the United
States.26 The Bankruptcy Code is codified at Title 11 of the United States Code and is divided into
nine distinct “Chapters.”27 The first three Chapters—Chapter 1 (General Provisions),28 Chapter 3
(Case Administration),29 and Chapter 5 (Creditors, the Debtor, and the Estate)30—contain
provisions that are generally applicable to most bankruptcy cases.31 The remaining Chapters,
which this report discusses below, create different types of bankruptcy proceedings for different
types of debtors.

20 455 U.S. 457 (1982).
21 Id. at 468-69.
22 142 S. Ct. 1770 (2022).
23 U.S. Dep’t of Just., About the Program (last updated Feb. 3, 2022), https://www.justice.gov/ust/about-program.
24 Siegel, 142 S. Ct. at 1782-83.
25 Id. at 1781.
26 Michelle M. Harner, The Corporate Governance and Public Policy Implications of Activist Distressed Debt
Investing, 77 FORDHAM L. REV. 703, 729 (2008).
27 See 11 U.S.C. §§ 101-1532.
28 Id. §§ 101-112.
29 Id. §§ 301-366. Note that, with a single exception, the Bankruptcy Code contains no even-numbered Chapters. See
id. §§ 101-1174, 1301-1532. But see id. §§ 1201-1232 (Chapter 12 of the Bankruptcy Code).
30 Id. §§ 501-562.
31 Jeffrey J. Harmon et al., Surviving a Collision at the Intersection of CERCLA and the Code, 20 N. KY. L. REV. 47, 48
(1992) (describing the “provisions contained in Chapters 1, 3, and 5 of the Bankruptcy Code” as “generally
applicable”). But see, e.g., 11 U.S.C. § 901(a) (rendering certain provisions of Chapters 3 and 5 inapplicable to
bankruptcy cases filed by a municipality).
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The Bankruptcy Code is not, however, the only source of U.S. bankruptcy law. For one, the
Federal Rules of Bankruptcy Procedure,32 which are “rules promulgated by the U.S. Supreme
Court (on the recommendation of the U.S. Judicial Conference and its committees, and with the
consent of Congress),” provide the core procedural rules that govern bankruptcy proceedings in
the United States.33 Many courts have supplemented the Federal Rules of Bankruptcy Procedure
by promulgating their own local procedural rules and orders that govern bankruptcy cases in their
respective districts.34 The Judicial Conference of the United States has also promulgated official
bankruptcy forms that litigants must use as templates when filing certain kinds of documents in a
bankruptcy case.35
Other federal laws can impact bankruptcy cases as well. For example, both the U.S. Code and the
U.S. Constitution restrict the types of issues that a bankruptcy judge36 may adjudicate.37
Additionally, “certain sections of the Bankruptcy Code . . . expressly incorporate state law, which
is often different from state to state.”38
The Key Players in a Bankruptcy Case
Although many types of people and entities can potentially play critical roles in a bankruptcy
proceeding,39 several participants in the bankruptcy process are particularly important. Central
among these are the debtor (who seeks relief from financial obligations the debtor cannot
satisfy)40 and the creditors (who seek to promptly and efficiently collect as much of the money
they are owed by the debtor as they can).41
The bankruptcy judge presides over the bankruptcy proceeding; reviews and rules upon filings
submitted by participants in the bankruptcy case; resolves certain types of disputes between the
parties; and performs other similar duties.42 The U.S. Courts of Appeals appoint bankruptcy

32 See FED. R. BANKR. P. 1001-9037. See also 28 U.S.C. § 2075 (governing the promulgation of bankruptcy rules).
33 See Samuel L. Bufford, Center of Main Interests, International Insolvency Case Venue, and Equality of Arms: The
Eurofood Decision of the European Court of Justice, 27 NW. J. INT’L L. & BUS. 351, 412 (2007).
34 Daniel A. Austin, Bankruptcy and the Myth of “Uniform Laws,” 42 SETON HALL L. REV. 1081, 1088-90 (2012)
(“Local bankruptcy rules are district-wide rules that apply to bankruptcy proceedings generally . . . Bankruptcy courts
also issue orders known as ‘general procedure orders’ or ‘standing orders.’ Like local rules, standing orders govern
procedures and practices in the bankruptcy court.”).
35 See FED. R. BANKR. P. 9009(a) (“The Official Forms prescribed by the Judicial Conference of the United States shall
be used . . . .”); Official Bankruptcy Forms B 101-B 4100R.
36 See infra “The Key Players in a Bankruptcy Case” and Appendix A for the definition of “bankruptcy judge.”
37 See, e.g., 28 U.S.C. § 157 (specifying which cases a bankruptcy judge “may hear and determine”); Stern v. Marshall,
564 U.S. 462, 469 (2011) (articulating limits that Article III of the U.S. Constitution places upon a bankruptcy court’s
authority to adjudicate certain matters).
38 Austin, supra note 34, at 1082. See also id. at 1086-87 (listing examples of “state law incorporated into the
Bankruptcy Code”).
39 See, e.g., 11 U.S.C. § 1109(b) (“A party in interest, including the debtor, the trustee, a creditors’ committee, an
equity security holders’ committee, a creditor, an equity security holder, or any indenture trustee, may raise and may
appear and be heard on any issue in [certain types of bankruptcy cases].”).
40 See, e.g., In re Kestella, 269 B.R. 188, 192 (S.D. Ohio 2001) (“One of the most important policies behind the
bankruptcy remedy is the provision of a ‘fresh start’ to debtors.”).
41 See, e.g., Hoseman v. Weinschneider, 322 F.3d 468, 475 (7th Cir. 2003) (“The administration of bankruptcy estates
has twin goals of maximization of realization on creditors’ claims and of prompt and efficient administration of the
estate.”).
42 E.g., Stephen A. Stripp, An Analysis of the Role of the Bankruptcy Judge and the Use of Judicial Time, 23 SETON
HALL L. REV. 1329, 1336-37, 1344 (1993). See also 28 U.S.C. § 157(b) (“Bankruptcy judges may hear and determine
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judges to serve “as judicial officers of the United States district court[s] established under Article
III of the Constitution” for fourteen-year terms.43 Unlike U.S. District Judges, however,
bankruptcy judges “enjoy neither tenure during good behavior nor salary protection,”44 and
therefore do not exercise “the judicial power of the United States” as defined in Article III of the
U.S. Constitution.45 As a consequence, both the U.S. Code46 and the U.S. Constitution restrict a
bankruptcy judge’s authority to adjudicate certain matters.47
The United States Trustee serves as “an auxiliary to the Bankruptcy Court.”48 Among other
duties,49 the Trustee oversees administrative matters in bankruptcy cases in most jurisdictions50 in
order “to prevent fraud, dishonesty, and overreaching in the bankruptcy system.”51 The United
States Trustee works “under the general supervision of the Attorney General” of the United
States, who “provide[s] general coordination and assistance to the United States trustees.”52
Not to be confused with the United States Trustee is the case trustee,53 whose role in the
bankruptcy proceeding differs depending on which Chapter of the Bankruptcy Code governs the
bankruptcy case.54 Some Chapters contemplate a major role for the case trustee;55 others

all cases under [the Bankruptcy Code] and all core proceedings arising under [the Bankruptcy Code], or arising in a
case under [the Bankruptcy Code].”).
43 28 U.S.C. § 152(a)(1).
44 Stern v. Marshall, 564 U.S. 462, 469 (2011).
45 See U.S. CONST. art. III, § 1 (“The judges, both of the supreme and inferior courts, shall hold their offices during
good behaviour, and shall, at stated times, receive for their services, a compensation, which shall not be diminished
during their continuance in office.”) (emphasis added).
46 See 28 U.S.C. § 157 (specifying which cases a bankruptcy judge “may hear and determine”).
47 See, e.g., Stern, 564 U.S. at 469 (holding that Article III of the U.S. Constitution prohibits bankruptcy judges from
adjudicating certain matters).
The parties to a dispute may, however, “knowingly and voluntarily consent to adjudication by a bankruptcy judge” of
certain claims that a bankruptcy judge would otherwise lack constitutional authority to adjudicate. Wellness Int’l
Network Ltd. v. Sharif, 575 U.S. 665, 669 (2015).
48 In re Davis, 538 B.R. 368, 390 n.14 (Bankr. S.D. Ohio 2015); In re Vance, 120 B.R. 181, 185 (Bankr. N.D. Okla.
1990).
49 See generally 28 U.S.C. § 586(a).
50 In North Carolina and Alabama, the U.S. Trustee’s duties are instead performed by “Bankruptcy Administrators.”
Kara Bruce, Closing Consumer Bankruptcy’s Enforcement Gap, 69 BAYLOR L. REV. 479, 489 n.52 (2017). See also
Rafael I. Pardo & Kathryn A. Watts, The Structural Exceptionalism of Bankruptcy Administration, 60 UCLA L. REV.
384, 394-99 (2012) (comparing and contrasting U.S. Trustees with Bankruptcy Administrators and explaining that a
“political compromise” “resulted in the [Bankruptcy Administrator] Program operating in Alabama and North Carolina
and the [U.S. Trustee] Program operating everywhere else”); see Siegel v. Fitzgerald, 142 S. Ct. 1770 (2022)
(invalidating law imposing different fees in districts with administrators but refraining from addressing the
constitutionality of the dual-administrative system).
51 E.g., Citicorp N. Am., Inc. v. Finley (In re Wash. Mfg. Co.), 123 B.R. 272, 275 (Bankr. M.D. Tenn. 1991) (quoting
H.R. REP. NO. 95-595, 95th Cong., 1st Sess., 88 (1977)).
52 28 U.S.C. § 586(c).
53 See United States ex rel. Yelverton v. Fed. Ins. Co. (In re Yelverton), Case No. 09-00414, 2015 WL 525180, at *1
(Bankr. D.D.C. Feb. 5, 2015) (“However, as Yelverton apparently misapprehends, the chapter 7 case trustee is not the
same entity as the United States Trustee.”).
54 Compare 11 U.S.C. § 704(a) (defining a Chapter 7 trustee’s duties), with id. § 1106(a) (defining a Chapter 11
trustee’s duties), with id. § 1202 (defining a Chapter 12 trustee’s duties), with id. § 1302 (defining a Chapter 13
trustee’s duties).
55 See, e.g., Midway Airlines, Inc. v. Nw. Airlines, Inc. (In re Midway Airlines, Inc.), 154 B.R. 248, 256-57 (N.D. Ill.
1993) (explaining that, in a case under Chapter 7 of the Bankruptcy Code, the case trustee “has the general duties of
marshalling all available property, reducing it to money, distributing it to creditors, and closing up the estate”).
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contemplate that a case trustee will have no role in the proceeding whatsoever absent exceptional
circumstances.56 A case trustee who is appointed in a Chapter 7 case is called the “Chapter 7
trustee”;57 a case trustee appointed in a Chapter 13 case is called the “Chapter 13 trustee,”58 and
so forth. This report discusses the case trustee’s respective role under each Chapter below.59
Filing for Bankruptcy
A debtor may declare bankruptcy by filing a document known as a bankruptcy “petition” with the
clerk of the bankruptcy court.60 Most debtors61 must also file a schedule of the debtor’s assets and
liabilities;62 a schedule of the debtor’s current income and expenditures;63 a statement of the
debtor’s financial affairs;64 and other required documents.65 These filing requirements “are
carefully designed to elicit certain information necessary to the proper administration and
adjudication of the case”66 and to “ensure that there is adequate information available to the
debtor’s creditors” to facilitate the fair and efficient distribution of the debtor’s income or
assets.67 Depending on the debtor’s financial circumstances, the debtor may also be required to
pay a filing fee.68 The debtor may also move for in forma pauperis status.69

56 See, e.g., Fifth Third Bank v. Circulatory Ctrs. of Am., LLC (In re Circulatory Ctrs. of Am., LLC), 579 B.R. 752,
758 (Bankr. W.D. Pa. 2017) (“The appointment of a trustee is exceptional in Chapter 11 reorganizations.”) (quoting
Official Comm. of Unsecured Creditors of Cybergenics Corp. ex rel. Cybergenics Corp. v. Chinery, 330 F.3d 548, 577
(3d Cir. 2003)).
57 See, e.g., In re Levine, 287 B.R. 683, 685 (Bankr. E.D. Mich. 2002).
58 See, e.g., In re Rivera, 268 B.R. 292, 293 (Bankr. D.N.M. 2001).
59 See infra “Types of Bankruptcy Proceedings.”
60 11 U.S.C. § 301(a); FED. R. BANKR. P. 1002(a), 1005; Official Bankruptcy Forms B 101 & B 201.
Under certain circumstances, creditors may also force an unwilling debtor into bankruptcy by filing an “involuntary”
bankruptcy petition against the debtor. 11 U.S.C. § 303; FED. R. BANKR. P. 1003. Such involuntary petitions make up a
small fraction of bankruptcies. Richard M. Hynes & Steven D. Walt, Revitalizing Involuntary Bankruptcy, 105 IOWA L.
REV. 1127, 1131-32 (2017) (“Federal Judicial Center data on all bankruptcy petitions filed between October 1, 2007
and September 30, 2017 [] show that involuntary petitions account for just 0.05 percent of all bankruptcy petitions and
just 2.2 percent of corporate petitions.”).
61 But see FED. R. BANKR. P. 1007(b)(1), (d), (e) (establishing different filing requirements for municipal debtors).
62 FED. R. BANKR. P. 1007(b)(1)(A).
63 FED. R. BANKR. P. 1007(b)(1)(B); Official Bankruptcy Forms B 106I & B 106J.
64 FED. R. BANKR. P. 1007(b)(1)(D); Official Bankruptcy Forms B 107 & B 207.
65 See generally FED. R. BANKR. P. 1007; 11 U.S.C. § 521.
66 E.g., Beer Sheva Realty Corp. v. Pongvitayapanu (In re Pongvitayapanu), 487 B.R. 130, 138 (Bankr. E.D.N.Y. 2013)
(quoting Siegel v. Weldon (In re Weldon), 184 B.R. 710, 715 (Bankr. D.S.C. 1995)).
67 E.g., Cho v. Park (In re Park), 480 B.R. 627, 639 (Bankr. D. Md. 2012).
68 See generally 28 U.S.C. § 1930; FED. R. BANKR. P. 1006.
69 See generally 28 U.S.C. § 1930(f).
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The Bankruptcy Estate
Filing a petition in the bankruptcy court creates a bankruptcy “estate”70 that, subject to certain
exceptions,71 is “comprised of the debtor’s property as of the commencement of the case.”72 The
assets in the bankruptcy estate are generally used “to satisfy claims of creditors and costs of the
proceedings.”73
Importantly, however, certain types of property are either not included in the estate or may
otherwise be removed from the reach of creditors. For instance, property that the debtor acquires
after filing his bankruptcy petition is, with some exceptions, “generally not property of the
estate.”74 The Bankruptcy Code does not define what constitutes a debtor’s property or interests
in property,75 however, and courts usually answer those questions by looking to state law.76
The Bankruptcy Code and applicable state law may allow an individual debtor to “exempt”
certain categories of assets from the property of the estate and thereby insulate those assets from
the claims of creditors.77 For example, depending on the circumstances, an individual debtor may
be able to claim articles of clothing,78 certain medical equipment,79 and his or her residence80 as
exempt from the claims of creditors. Permitting an individual debtor to claim certain assets as
exempt “allow[s] a debtor to protect property which is necessary for the survival of both the

70 E.g., Westmoreland Human Opportunities, Inc. v. Walsh, 246 F.3d 233, 241 (3d Cir. 2001). Accord 11 U.S.C.
§ 541(a) (providing that “the commencement of a case” under the Bankruptcy Code “creates an estate,” and specifying
which property the “estate is comprised of”).
71 See 11 U.S.C. § 541(b) (listing categories of assets that are not included as property of the estate); see also 11 U.S.C.
§ 541(d) (excluding from the estate property in which the debtor holds only legal title and not an equitable interest).
72 Westmoreland Human Opportunities, 246 F.3d at 241. Accord, e.g., 11 U.S.C. § 541(a).
73 E.g., Traina v. Sewell (In re Sewell), 180 F.3d 707, 710 (5th Cir. 1999).
74 Jackson v. Novak (In re Jackson), 593 F.3d 171, 176 (2d Cir. 2010). Accord, e.g., Peters v. Wise (In re Wise), 346
F.3d 1239, 1241 (10th Cir. 2003) (“Generally, property the debtor acquires post-petition does not become property of
the bankruptcy estate.”). But see, e.g., 11 U.S.C. § 541(a)(5)(B) (creating one of several exceptions to the general rule
that the estate does not include post-petition property); id. § 1306(a) (expanding the definition of “property of the
estate” in Chapter 13 cases to include certain assets acquired “after the commencement of the case”).
75 See Butner v. United States, 440 U.S. 48, 54 (1979).
76 Rodriguez v. Fed. Deposit Ins. Corp., 140 S. Ct. 713, 718 (2020); Travelers Cas. and Sur. Co. of Am. v. Pac. Gas and
Elec. Co., 549 U.S. 443, 450-451 (2007).
77 E.g., 11 U.S.C. § 522(b)(1) (“An individual debtor may exempt from property of the estate the property listed in
either paragraph (2) or, in the alternative, paragraph (3) of this subsection.”); In re Puff ’n Stuff of Winter Park, Inc.,
183 B.R. 959, 960 (Bankr. M.D. Fla. 1995) (“Section 522(b) of the Bankruptcy Code permits debtors to exempt certain
property from the claims of creditors.”).
78 See, e.g., 11 U.S.C. § 522(b)(2), (d)(3) (permitting an individual debtor to exempt “the debtor’s interest, not to
exceed $400 in value in any particular item or $8,000 in aggregate value, in . . . wearing apparel [and other similar
items] that are held primarily for the personal, family, or household use of the debtor or a dependent of the debtor”
unless “State law . . . specifically does not so authorize”).
79 See, e.g., id. § 522(b)(2), (d)(9) (permitting a debtor to exempt “professionally prescribed health aids for the debtor
or a dependent of the debtor” unless “State law . . . specifically does not so authorize”).
80 See, e.g., Goodrich v. Fuentes (In re Fuentes), 687 F. App’x 542, 543 (9th Cir. 2017) (affirming bankruptcy court’s
order permitting debtor to “claim a homestead exemption in a piece of real property”). See also 11 U.S.C. § 522(b)(2),
(d)(1) (permitting a debtor to exempt “the debtor’s aggregate interest, not to exceed $15,000 in value, in real property
or personal property that the debtor or a dependent of the debtor uses as a residence” unless “State law . . . specifically
does not so authorize”).
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debtor and the debtor’s family.”81 Note, however, that a non-individual debtor, such as a
corporation or other business entity, may not declare property as exempt.82
The Automatic Stay
Filing for bankruptcy affords the debtor several immediate benefits. Perhaps most importantly,83
“the filing of a bankruptcy petition stays the commencement or continuation of all nonbankruptcy
judicial proceedings against the debtor”;84 precludes creditors from taking “any act to collect,
assess, or recover a claim against the debtor that arose before the commencement of the case”;85
and, with certain exceptions,86 prohibits creditors from taking almost any action “against the
debtor or the property of the estate,”87 including the enforcement of preexisting liens or
judgments against the debtor and the exercise of control over the debtor’s property.88 These
protections are collectively known as the “automatic stay.”89 The stay is “automatic” because “it
operates without the necessity for judicial intervention”;90 it “is triggered upon the filing of a
bankruptcy petition regardless of whether the other parties to the stayed proceeding are aware that
a petition has been filed.”91 The automatic stay generally remains in effect until the bankruptcy
court closes the case, dismisses the case, or grants the debtor a discharge, whichever comes first.92
“The policy underlying the automatic stay is to protect the debtor’s estate from ‘the chaos and
wasteful depletion resulting from multifold, uncoordinated and possibly conflicting litigation’”
that could occur in the absence of the stay.93 “The automatic stay provides debtors a breathing
spell from creditors by preventing ‘all collection efforts, all harassment, and all foreclosure

81 Menninger v. Schramm (In re Schramm), 431 B.R. 397, 400 (B.A.P. 6th Cir. 2010).
82 See, e.g., 11 U.S.C. § 522(b)(1) (providing that “an individual debtor may exempt” certain assets (emphasis added));
Nickless v. Prime Title Servs., Inc. (In re Prime Mortg. Fin., Inc.), Bankr. No. 08-40238-MSH, Adv. No. 09-4046,
2010 WL 4256191, at *2 (Bankr. D. Mass. Oct. 21, 2010) (“Prime Mortgage is not an individual and thus not entitled
to exempt any property under § 522.”).
83 See, e.g., Eskanos & Adler, P.C. v. Leetien, 309 F.3d 1210, 1214 (9th Cir. 2002) (describing the automatic stay as
“one of the most important protections in bankruptcy law”).
84 Soares v. Brockton Credit Union (In re Soares), 107 F.3d 969, 973 (1st Cir. 1997). Accord, e.g., 11 U.S.C.
§ 362(a)(1).
85 11 U.S.C. § 362(a)(6).
86 See, e.g., id. § 362(b)(1) (providing that filing a bankruptcy petition does not stay “the commencement or
continuation of a criminal action or proceeding against the debtor”); id. § 362(b)(2)(v) (providing that filing a
bankruptcy petition does not stay “the commencement or continuation of a civil action or proceeding . . . concerning
child custody or visitation”). See generally id. § 362(b)(1)-(28).
87 E.g., Crespo Torres v. Santander Fin. Servs. (In re Crespo Torres), 532 B.R. 195, 200 (Bankr. D.P.R. 2015) (quoting
ALAN N. RESNICK & HENRY J. SOMMER, 3 COLLIER ON BANKRUPTCY ¶ 362.03 (16th ed. 2015)).
88 Ritzen Group, Inc. v. Jackson Masonry, LLC, 140 S. Ct. 582, 589 (2020).
89 See, e.g., 11 U.S.C. § 362; see City of Chicago v. Fulton, 141 S. Ct. 585, 589 (“When a debtor files a petition for
bankruptcy, the Bankruptcy Code protects the debtor’s interests by imposing an automatic stay.”).
90 E.g., LaBarge v. Vierkant (In re Vierkant), 240 B.R. 317, 320 (B.A.P. 8th Cir. 1999) (quoting Soares, 107 F.3d at
975).
91 E.g., id. (quoting Constitution Bank v. Tubbs, 68 F.3d 685, 691 (3d Cir. 1995)).
92 11 U.S.C. § 362(c)(2). To the extent that a creditor instead desires to take an action against specific “property of the
estate,” the automatic stay “continues until such property is no longer property of the estate.” Id. § 362(c)(1).
93 E.g., In re Curtis, 40 B.R. 795, 799 (Bankr. D. Utah 1984) (quoting Litton Sys., Inc. v. Frigitemp Corp. (In re
Frigitemp Corp.), 8 B.R. 284, 289 (S.D.N.Y. 1981)).
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actions.’”94 “The stay protects creditors, too, by precluding certain ‘creditors from acting
unilaterally in self-interest to obtain payment from a debtor to the detriment of other creditors.’”95
Creditors who knowingly violate the automatic stay—such as by attempting to collect a debt from
the debtor96—does so at their peril.97 “An individual injured by any willful violation of” the
automatic stay may potentially “recover actual damages” against the violator, “including costs
and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.”98 Thus, if
a creditor or other entity subject to the automatic stay wishes to take action against the debtor or
the debtor’s estate, it must usually ask the bankruptcy court to “grant relief from the stay, . . . such
as by terminating, annulling, modifying, or conditioning the stay” to allow the creditor to take the
requested action.99 The court may grant relief from the automatic stay “for cause,”100 as may exist
when “the hardship to the movant” resulting from the enforcement of the automatic stay would
outweigh “the hardship to the debtor” if the automatic stay were lifted,101 or when the debtor has
filed bankruptcy in bad faith solely to prevent an impending foreclosure.102 Alternatively, the
court may also grant relief “with respect to a stay of an act against property” if “the debtor does
not have an equity in such property” and “such property is not necessary to an effective
reorganization” of the debtor.103 As a result, a creditor may, for example, be able to successfully
obtain relief from the automatic stay when the debtor has failed to make timely mortgage
payments.104 The likelihood that a bankruptcy court will grant a party relief from the automatic
stay varies depending on the context.105

94 E.g., In re Capgro Leasing Assocs., 169 B.R. 305, 310 (Bankr. E.D.N.Y. 1994) (quoting Maritime Elec. Co. v.
United Jersey Bank, 959 F.2d 1194, 1204 (3d Cir. 1991)).
95 E.g., id. (quoting Maritime Elec. Co., 959 F.2d at 1204).
96 See, e.g., In re Capion, Nos. 98-2242 DH, 98-4140 DH, 2000 WL 35798603, at *5 (Bankr. S.D. Iowa June 28, 2000)
(“The court finds that these . . . attempts to collect a debt were violations of the automatic stay.”).
97 See, e.g., Clark v. United States (In re Clark), 207 B.R. 559, 565 (Bankr. S.D. Ohio 1997) (“Unless a particular
proceeding is specifically designated an exception to the automatic stay . . ., creditors must obtain relief from the stay . .
. prior to taking any action involving property of the estate. To the extent creditors fail to do so, they act at their own
peril.”) (internal citations omitted).
98 11 U.S.C. § 362(k)(1).
99 Id. § 362(d). See also FED. R. BANKR. P. 4001(a) (governing motions for relief from the automatic stay).
100 11 U.S.C. § 362(d)(1).
101 E.g., In re Bell, 476 B.R. 168, 179 (Bankr. E.D. Pa. 2012).
102 E.g., In re Lippolis, 228 B.R. 106, 112 (E.D. Pa. 1998).
103 11 U.S.C. § 362(d)(2).
104 See, e.g., In re Sterling, Case No. 14-12608-shl, 2018 WL 313085, at *5 (Bankr. S.D.N.Y. Jan. 5, 2018) (“The
failure to make mortgage payments constitutes ‘cause’ for relief from the automatic stay and is one of the best
examples of a ‘lack of adequate protection’ under Section 362(d)(1) of the Bankruptcy Code.”) (quoting In re
Schuessler, 386 B.R. 458, 480 (Bankr. S.D.N.Y. 2008)).
105 Compare In re Qimonda AG, No. 09-14766-RGM, 2009 WL 2210771, at *4 (Bankr. E.D. Va. July 16, 2009) (“It is
not uncommon for bankruptcy courts to grant relief from the automatic stay to allow complicated disputed claims to be
liquidated in other courts.”), with Hon. John M. Tyson, Automatic Stays and Administrative Expenses: Rights and
Remedies Available to Landlords and Tenants in Bankruptcy Proceedings, 31 CAMPBELL L. REV. 413, 418 (2009)
(“Relief from the automatic stay in order to evict a debtor-tenant for default on an unexpired lease is rare and difficult
to obtain.”).
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Types of Bankruptcy Proceedings
Broadly speaking, “the United States has three methods of declaring bankruptcy: liquidation,
reorganization, and adjustment of debts.”106 When filing a bankruptcy petition, the debtor must
select which of these methods to utilize by choosing a “Chapter” of the Bankruptcy Code under
which to file. The Bankruptcy Code functionally creates a menu of different bankruptcy
proceedings that a debtor, with certain exceptions, may potentially utilize:107
1. liquidation proceedings under Chapter 7;108
2. reorganization proceedings under Chapter 11;109
3. reorganization geared toward small businesses;110
4. the adjustment of debts of an individual with regular income under Chapter 13;111
5. the adjustment of debts of a family farmer or fisherman with regular annual
income under Chapter 12;112
6. the adjustment of debts of a municipality under Chapter 9;113 and
7. ancillary and cross-border cases under Chapter 15.114
As explained in greater detail below, each of these types of proceedings has different eligibility
requirements, is governed by different procedures, and results in different forms of relief.115 Some
debtors, depending on their individual characteristics, may be eligible to file bankruptcy under
more than one Chapter, and may therefore select whichever form of bankruptcy proceeding
would be most advantageous in light of the debtor’s particular financial circumstances.116 Other
debtors may be eligible to file only under a single Chapter, and must either file bankruptcy under
that Chapter or not file at all.117 Still other debtors may not be eligible to file for bankruptcy under
any Chapter of the Bankruptcy Code whatsoever.118

106 Richard H.W. Maloy, Comparative Bankruptcy, 24 SUFFOLK TRANSNAT’L L. REV. 1, 10 (2000).
107 For the sake of clarity, and to more clearly illustrate the pertinent differences between the various Chapters of the
Bankruptcy Code, this report does not discuss these Chapters in numerical order.
108 11 U.S.C. §§ 701-784.
109 Id. §§ 1101-1174.
110 Id. §§ 1181-1195; id. § 101(51C).
111 Id. §§ 1301-1330.
112 Id. §§ 1201-1232.
113 Id. §§ 901-946.
114 Id. §§ 1501-1532.
115 Appendix B to this report contains a table of the most important differences between each Chapter.
116 See generally 11 U.S.C. § 109 (establishing eligibility requirements for declaring bankruptcy under the various
Chapters of the Bankruptcy Code).
117 See, e.g., id. § 109(b)(1), (d) (limiting the Chapters under which a railroad may validly file for bankruptcy).
118 See, e.g., id. § 109(g) (“No individual or family farmer may be a debtor under [any Chapter of the Bankruptcy Code]
who has been a debtor in a case pending under [the Bankruptcy Code] at any time in the preceding 180 days if . . . the
case was dismissed by the court for willful failure of the debtor to abide by orders of the court, or to appear before the
court in proper prosecution of the case.”).
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Chapter 7 Liquidation
A liquidation proceeding under “Chapter 7 is the most common form of bankruptcy.”119
According to the Administrative Office of U.S. Courts, in many years it is common for some half
a million debtors to file bankruptcy pursuant to this Chapter,120 although that number has
decreased during the COVID-19 pandemic.121 Notable examples of companies that have filed
bankruptcy under Chapter 7 include the Bennigan’s restaurant chain,122 the Arena Football
League,123 IndyMac Bancorp,124 video game company Acclaim Entertainment,125 and luxury
brand Art Fashion Corporation.126
“The primary purpose” of Chapter 7 “is to liquidate the [d]ebtor[’s] assets in order to satisfy the
[d]ebtor[’s] creditors.”127 To facilitate this liquidation, the case is administered by a Chapter 7
trustee128 who, among other responsibilities,129 “has the general duties of marshalling all available
property, reducing it to money, distributing it to creditors, and closing up the estate.”130
Eligibility for Chapter 7 Bankruptcy
Both individual debtors and non-individual debtors (such as corporations, limited liability
companies, and other business entities) may potentially be eligible for Chapter 7 relief. Chapter 7
treats the two types of debtors differently, as explained below.
Individual Debtors
Chapter 7 potentially “allows an individual who is overwhelmed by debt to obtain a ‘fresh start’
in the form of a discharge of most types of debt by surrendering for distribution his or her
nonexempt property.”131 However, the Bankruptcy Code—starting in 2005 with the passage of the

119 Arthur Best, Lying Lawyers and Recumbent Regulators, 49 IND. L. REV. 1, 13 (2015). Accord, e.g., In re Brooks,
784 F.3d 380, 381 (7th Cir. 2015) (same).
120 Admin. Office of the U.S. Courts, June 2017 Bankruptcy Filings Down 2.8 Percent (July 21, 2017),
http://www.uscourts.gov/news/2017/07/21/june-2017-bankruptcy-filings-down-28-percent.
121 Admin. Office of U.S. Courts, supra note 13.
122 Jack F. Williams et al., American Bankruptcy Institute Media Teleconference to Examine the Future of Retail Sector
Distress, 17 AM. BANKR. INST. L. REV. 85, 93 (2009) (“Bennigan’s, for example, a casual retail dining chain, decided
not to even do a chapter 11, but went straight to chapter 7 . . . And one of the key elements in that decision was that so
many of their properties needed capital expenditures for improvements and there just wasn’t the money to do it.”).
123 See In re Arena Football League LLC, Case No. 19-BK-12541 (Bankr. D. Del.), Docket No. 1 (Chapter 7
bankruptcy petition).
124 See Siegel v. FDIC (In re Indymac Bancorp, Inc.), Bankr. No. 2:08-bk-21752-BB, Adv. No. 2:09-ap-01698-BB,
2012 WL 1037481, at *1 (Bankr. C.D. Cal. Mar. 29, 2012).
125 See In re Acclaim Entm’t, Inc., Case No. 8:04-BK-85595 (Bankr. E.D.N.Y.), Docket No. 1 (Chapter 7 bankruptcy
petition).
126 See In re Art Fashion Corp., Case No. 19-BK-11043 (Bankr. S.D.N.Y.), Docket No. 1 (Chapter 7 bankruptcy
petition).
127 E.g., In re Cohen, 141 B.R. 1, 1 (Bankr. D. Mass. 1992).
128 See 11 U.S.C. § 701 (providing for the appointment of an interim Chapter 7 trustee); id. § 702 (providing for the
election of a permanent Chapter 7 trustee to replace the interim trustee).
129 See generally id. § 704(a)(1) (enumerating the duties of a Chapter 7 trustee).
130 E.g., Midway Airlines, Inc. v. Nw. Airlines, Inc. (In re Midway Airlines, Inc.), 154 B.R. 248, 256-57 (N.D. Ill.
1993).
131 In re Lopez, No. 08-14625-SSM, 2008 WL 5786897, at *1 (Bankr. E.D. Va. Nov. 6, 2008) (quoting Local Loan Co.
v. Hunt, 292 U.S. 234, 244 (1934)). See generally 11 U.S.C. § 109(b) (establishing eligibility requirements for Chapter
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Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA)—limits an individual
debtor’s ability to obtain Chapter 7 relief by imposing a “means test” to determine whether “an
individual debtor . . . whose debts are primarily consumer debts” qualifies for Chapter 7 relief.132
If the debtor’s current monthly income, reduced by certain allowable expenses, exceeds statutory
thresholds established by the Bankruptcy Code, then the bankruptcy court must either dismiss the
Chapter 7 case or convert the case to a debt adjustment proceeding under Chapter 13.133 “The
primary purpose of the means test in Chapter 7 is to shift consumer debtors into Chapter 13” of
the Bankruptcy Code—which this report discusses in greater detail below134—when those debtors
are able to “pay some or all of their debts in a Chapter 13 plan.”135
Under BAPCPA, the Director of the Administrative Office of the U.S. Courts must submit an
annual report to Congress on certain bankruptcy statistics (BAPCPA Report).136 The BAPCPA
Report includes “statistics regarding debtors who are individuals with primarily consumer debts
seeking relief under chapters 7, 11, and 13 of title 11.”137 In the most recent BAPCPA Report, for
the year 2021, Chapter 7 bankruptcies made up approximately 70 percent of new petitions.138
Non-Individual Debtors
Many (though not all) types of non-individual debtors are, like individual debtors, potentially
eligible for Chapter 7 bankruptcy.139 “[I]n a Chapter 7 proceeding involving a business entity, the
trustee assumes control of the entity for the purpose of realizing the maximum value that is
available for the benefit of the creditors.”140 Also, for reasons explained in greater detail below,
some bankruptcy cases filed by non-individual debtors begin as Chapter 11 reorganizations141 but
are subsequently converted to Chapter 7 liquidations.142 To convert from Chapter 11 to Chapter 7,
a debtor must file a motion under Bankruptcy Code Section 1112(b).143

7).
132 11 U.S.C. § 707(b)(1)-(2). See also, e.g., In re Fredman, 471 B.R. 540, 542 (Bankr. S.D. Ill. 2012) (“With the
enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), 11 U.S.C. § 707(b)
was amended to add a screening mechanism, known as the ‘means test.’ The purpose of the means test is to weed out
chapter 7 debtors who are capable of funding a chapter 13 case.”); Official Bankruptcy Form 122A-2 (Chapter 7 Means
Test Calculation form).
133 E.g., In re Arndt, Case No. 17-30226, 2017 WL 5164141, at *3 (Bankr. N.D. Ohio Nov. 6, 2017); In re Ralston, 400
B.R. 854, 856 (Bankr. M.D. Fla. 2009); 11 U.S.C. § 707(b)(1)-(2). See also 11 U.S.C. § 104(a) (providing that 11
U.S.C. § 707(b)’s dollar limits automatically adjust every three years “to reflect the change in the Consumer Price
Index for All Urban Consumers[] published by the Department of Labor”).
134 See infra “Chapter 13 Consumer Cases.”
135 E.g., In re Richardson, No. 08-82000, 2009 WL 65178, at *2 (Bankr. C.D. Ill. Jan. 8, 2009).
136 28 U.S.C. § 159.
137 28 U.S.C. § 159(a).
138 Admin. Office of the U.S. Courts, BAPCPA Report—2021 (Dec. 31, 2021), https://www.uscourts.gov/statistics-
reports/bapcpa-report-2021.
139 See 11 U.S.C. § 109(b).
140 E.g., Ormet Corp. v. Boury (In re Boury, Inc.), No. Civ.A. 5:01CV134, 2002 WL 32290985, at *2 (N.D. W. Va.
Aug. 23, 2002).
141 See infra “Chapter 11 Reorganization.”
142 See infra “Conversion to Another Chapter.”
143 11 U.S.C. § 1112(b).
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Unlike an individual debtor, however, a non-individual debtor does not receive a discharge of its
outstanding debts at the conclusion of a Chapter 7 liquidation.144 Congress opted to prohibit non-
individual debtors from obtaining a discharge under Chapter 7 in order “to prevent businesses
from evading liability by liquidating debtor corporations and resuming business free of debt.”145
“Corporate debt” therefore “survive[s] Chapter 7 proceedings” and is “charged against the
corporation when it resume[s] operations.”146 “Despite the inability to obtain a discharge, some
corporations” and other business entities nonetheless “choose Chapter 7 bankruptcy because it
provides an efficient process by which the corporation may sell off its assets and distribute the
proceeds to its creditors.”147 “After filing Chapter 7 bankruptcy, . . . the corporate debtor is
usually expected to dissolve because its debts are not ‘discharged’ and continued business will
impact its relationships with creditors.”148
Liquidation and Distribution of the Estate
As noted above, in a Chapter 7 liquidation, the case trustee “sells the property of the estate and
distributes the proceeds to the debtor’s creditors.”149 The Bankruptcy Code establishes a complex
priority framework of expenses and claims that are entitled to payment before others.150 For
example, a “secured creditor”—who has a legal right against certain property (known as
“collateral”) that the debtor pledged as security against the debt in the event the debtor
defaulted151—is generally “entitled to be paid in full out of the proceeds of the collateral before
any of those proceeds may be used to pay”152 any “unsecured creditor” who, “upon giving
credit” to the debtor, took “no rights against specific property of the debtor.”153 To name another
example, claims for specified types of domestic support obligations are entitled to be paid before
certain unpaid property taxes.154

144 Id. § 727(a) (“The court shall grant the debtor a discharge, unless . . . the debtor is not an individual.”) (emphasis
added).
145 E.g., NLRB v. Better Bldg. Supply Corp., 837 F.2d 377, 379 (9th Cir. 1988).
146 E.g., id.
147 Moody v. Tiny Treasures of Richland, Inc., Civil Action No. 3:08-CV-318-HTW-LRA, 2014 WL 12709475, at *5
(S.D. Miss. Feb. 20, 2014). See also, e.g., Kelley v. Cypress Fin. Trading Co., L.P. (In re Cypress Fin. Trading Co.,
L.P.), 620 F. App’x 287, 289 (5th Cir. 2015) (“A corporate Chapter 7 (and the resulting automatic stay) may allow
breathing space for a neutral third party to marshal assets for orderly distribution to creditors.”).
148 E.g., Moody, 2014 WL 12709475, at *5. Importantly, however, “liquidation through Chapter 7 does not” itself
“effect dissolution of the company.” E.g., In re Or. Homes, LLC, No. 13-33349, 2014 WL 4794861, at *4 (Bankr. N.D.
Ohio Sept. 25, 2014). To officially dissolve a liquidated debtor, the debtor must instead utilize the dissolution
procedures established by state law. See, e.g., Better Bldg., 837 F.2d at 379 (“Chapter 7 proceedings cannot dissolve a
corporation. If the Mylans sought to dissolve their corporations, they should have used state procedures.”).
149 In re Hawk, 871 F.3d 287, 292 (5th Cir. 2017). Accord, e.g., 11 U.S.C. § 704(a)(1) (“The trustee shall . . . collect
and reduce to money the property of the estate.”); id. § 725 (“The trustee, after notice and a hearing, shall dispose of
any property in which an entity other than the estate has an interest, such as a lien, and that has not been disposed of
under another section of this title.”); id. § 726 (governing distribution of the property of the estate).
150 See generally 11 U.S.C. §§ 507, 725, 726(a).
151 See “Secured Claim,” BLACK’S LAW DICTIONARY (10th ed. 2014); “Collateral,” BLACK’S LAW DICTIONARY (10th ed.
2014).
152 E.g., Greaves v. Office of the Del. Attorney Gen. (In re Two Springs Membership Club), 424 B.R. 808, 815 (Bankr.
N.D. Ohio 2010). See also 11 U.S.C. §§ 725, 726(a).
153 Unsecured Creditor, BLACK’S LAW DICTIONARY (10th ed. 2014).
154 Compare 11 U.S.C. § 507(a)(1)(A), with id. § 507(a)(8)(B). See also id. § 726(a) (specifying that “property of the
estate shall” generally “be distributed . . . in the order specified in[] section 507”).
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“Lower priority creditors cannot receive anything until higher priority creditors are paid in
full.”155 If, due to a shortfall of assets in the estate, “a priority tier cannot be paid in full,” then
“distribution is made pro rata among creditors within such tier.”156 If, by contrast, “the estate has
enough assets to pay in full all . . . priority claims, distribution will be made pro rata among”
creditors in the lower tiers.157
Chapter 11 Reorganization
Whereas the purpose of a Chapter 7 proceeding is to liquidate the debtor, most Chapter 11
proceedings aim to reorganize the debtor’s debt structure so that the debtor may continue to
operate.158 A Chapter 11 reorganization “is premised on the concept that the debtor is worth more
as a going concern than in liquidation. That is, continuation of the debtor’s business will create
more value than will dismemberment and piecemeal sale of the assets.”159 Thus, a debtor that
aims to emerge from bankruptcy as an operating entity as opposed to shuttering its doors will
likely prefer a Chapter 11 reorganization to a Chapter 7 liquidation.160 Some creditors may
likewise prefer that the debtor reorganize under Chapter 11 instead of liquidating under Chapter
7, depending on whether or not they stand to derive a greater economic benefit from the debtor
continuing to operate as a going concern than if the debtor were promptly liquidated.161
Chapter 11 is “intended primarily for the use of business debtors” such as corporations and
limited liability companies.162 Notable examples of large companies that have filed for

155 Czyzewski v. Jevic Holding Corp., 137 S. Ct. 973, 983 (2017).
156 In re Swann, 149 B.R. 137, 145 (Bankr. D.S.D. 1993) (quoting In re Higgins, 29 B.R. 196, 199 (Bankr. N.D. Iowa
1983)).
157 Id. (quoting Higgins, 29 B.R. at 199).
158 Czyzewski, 137 S. Ct. at 979. Accord, e.g., Tamir v. U.S. Trustee, 566 B.R. 278, 282-83 (D. Me. 2016) (“Chapter 11
debtors are generally seeking to emerge from bankruptcy as viable, profitable individuals or enterprises.”).
That said, some Chapter 11 proceedings are intended to liquidate the debtor rather than reorganize the debtor as a going
concern. See, e.g., Fla. Dep’t of Revenue v. Piccadilly Cafeterias, Inc., 554 U.S. 33, 37 n.2 (2008) (“Although the
central purpose of Chapter 11 is to facilitate reorganizations rather than liquidations (covered generally by Chapter 7),
Chapter 11 expressly contemplates liquidations.”); In re Poydras Manor, Inc., 242 B.R. 603, 605, 608 (Bankr. E.D. La.
2000) (confirming a “Chapter 11 liquidation” plan “under which all of [the debtor’s] assets will be liquidated and the
proceeds distributed to creditors”). In contrast to a Chapter 7 liquidation, a Chapter 11 liquidation “allows a debtor in
possession (who is presumably more familiar with the organization’s assets, and their values), rather than a Chapter 7
trustee, to plan for an orderly divestiture” of the debtor’s assets “over time. In a proper case, the expertise of the debtor
in possession can result in a liquidation that produces more for the benefit of creditors than would a liquidation
conducted by a Chapter 7 trustee.” Rachlin Cohen & Holtz, LLP v. Mirabilis Ventures, Inc. (In re Mirabilis Ventures,
Inc.), Nos. 6:08-bk-04237-KSJ, 6:09-cv-1658-Orl-31, 6:09-cv-1659, 6:09-cv-1660, 2010 WL 1644915, at *5 (M.D.
Fla. Apr. 21, 2010).
159 E.g., Frederick Tung, Confirmation and Claims Trading, 90 NW. U. L. REV. 1684, 1689 (1996).
160 See Maloy, supra note 106, at 13 (“A debtor prefers Chapter 11 to Chapter 7 when the debtor is experiencing
temporary difficulties in paying its debts due to cash flow problems, shrinking markets, or the like. In these
circumstances, the debtor needs a breathing spell to work out of its financial bind.”).
161 See id. (“Supplier creditors may prefer Chapter 11 to Chapter 7 in order to keep alive a good customer, who is
merely experiencing a temporary financial problem. Employee creditors may prefer Chapter 11 as well, because it will
keep their paychecks coming, albeit possibly in smaller amounts. Creditors often prefer Chapter 11 because a
Bankruptcy Judge will not confirm a Chapter 11 plan unless creditors are assured of receiving at least as much as they
would receive under Chapter 7.”). But see Alan Schwartz, A Contract Theory Approach to Business Bankruptcy, 107
YALE L.J. 1807, 1836-37 (1998) (“Senior creditors today commonly prefer firms to use Chapter 7 . . . while junior
creditors commonly prefer firms to use Chapter 11.”).
162 Toibb v. Radloff, 501 U.S. 157, 166 (1991).
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bankruptcy under Chapter 11 include Kmart,163 General Motors,164 Alex and Ani,165 and the Los
Angeles Dodgers.166
Notwithstanding that Chapter 11 is “intended primarily for the use of business debtors,”
“individual debtors not engaged in business” may be eligible to “file for relief under Chapter 11”
as well.167 In particular, an individual debtor who is ineligible to file for bankruptcy under
Chapter 13 because his outstanding debt exceeds statutory debt limits established by the
Bankruptcy Code168 may instead be able to file under Chapter 11.169 That said, even though
“Chapter 11 is not restricted to business-debtors, business entities file under Chapter 11 far more
frequently than individual debtors do.”170 For instance, in the twelve-month period ending on
June 30, 2021, “non-business” Chapter 11s accounted for only 464 of 4,429 Chapter 11
bankruptcies.171
“The primary goal of Chapter 11” is “to formulate a comprehensive reorganization plan”172 that
adjusts “the rights and obligations among the debtor and its debt- and equityholders . . . so as to
render the reorganized debtor a viable economic entity.”173 “The chapter 11 plan becomes a
binding contract between the debtor and its creditors, and governs their rights and obligations.”174
The Debtor-In-Possession
Unlike in a Chapter 7 liquidation, in which a trustee administers the debtor’s assets in order to
satisfy the claims of creditors,175 a Chapter 11 debtor generally remains in possession of its assets
throughout the entire reorganization proceeding176 “and administers them for the benefit of the
creditor body.”177 Congress decided when enacting the Bankruptcy Code that “current

163 See Kmart Corp. v. Intercraft Co. (In re Kmart Corp.), 310 B.R. 107, 111 (Bankr. N.D. Ill. 2004).
164 See Chenault v. Gen. Motors LLC (In re Motors Liquidation Co.), No. 16-CV-3764 (RA), 2017 WL 698387, at *1
(S.D.N.Y. Feb. 21, 2017).
165 See In re A and A Shareholding Co., LLC, 21-BK-10917 (Bankr. D. Del.) Docket No. 1 (Chapter 11 bankruptcy
petition).
166 See In re L.A. Dodgers LLC, No. 11-12010 (KG), 2012 WL 1601177 (Bankr. D. Del. May 3, 2012) (order
confirming Chapter 11 plan).
167 Toibb, 501 U.S. at 166. See also 11 U.S.C. § 109(d), (g)-(h) (establishing eligibility requirements for individual
Chapter 11 debtors).
168 See infra “Chapter 13 Consumer Cases.”.
169 See Anne Lawton, The Individual Chapter 11 Debtor Pre- and Post-BAPCPA, 89 AM. BANKR. L.J. 455, 468 (2015)
(explaining that some (though not all) “individual chapter 11 debtors file for chapter 11, rather than chapter 13, because
chapter 13’s debt limits pose a barrier to entry”). See also 11 U.S.C. § 109(e) (disqualifying any individual who owes a
total amount of debt that exceeds specified statutory limits from “be[ing] a debtor under chapter 13”).
170 Maloy, supra note 106, at 10.
171 Admin. Office of the U.S. Courts, U.S. Bankruptcy Courts—Business and Nonbusiness Cases Commenced, by
Chapter of the Bankruptcy Code, During the 12-Month Period Ending June 30, 2022 (June 30, 2022),
https://www.uscourts.gov/sites/default/files/data_tables/bf_f2_0630.2022.pdf.
172 E.g., Tamir v. U.S. Trustee, 566 B.R. 278, 283 (D. Me. 2016).
173 E.g., Tung, supra note 159, at 1690.
174 In re Nylon Net Co., 225 B.R. 404, 406 (Bankr. W.D. Tenn. 1998). Accord, e.g., 11 U.S.C. § 1141(a).
175 E.g., Midway Airlines, Inc. v. Nw. Airlines, Inc. (In re Midway Airlines, Inc.), 154 B.R. 248, 256-57 (N.D. Ill.
1993); 11 U.S.C. § 704(a)(1).
176 In re Marvel Entm’t Grp., Inc., 140 F.3d 463, 471 (3d Cir. 1998).
177 Lazzo v. Rose Hill Bank (In re Schupbach Invs., L.L.C.), 808 F.3d 1215, 1223 (10th Cir. 2015) (quoting Bowers v.
Atlanta Motor Speedway, Inc. (In re SE Hotel Props., Ltd. P’ship), 99 F.3d 151, 152 n.1 (4th Cir. 1996)).
Nevertheless, under certain circumstances, including “fraud, dishonesty, incompetence, or gross mismanagement of the
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management is generally best suited to orchestrate the process of rehabilitation for the benefit of
creditors and other interests of the estate,” and as a result Chapter 11 typically permits the debtor
(rather than a trustee) to remain in control of its assets and operations.178 When acting in this
capacity, the debtor is known as the “debtor-in-possession.”179 Managers of the debtor therefore
generally “prefer Chapter 11 to Chapter 7 because Chapter 11 allows them to retain control of the
firm as a debtor-in-possession, whereas Chapter 7, by requiring appointment of a trustee, does
not.”180
With some exceptions that are dealt with immediately upon filing for bankruptcy,181 the debtor-in-
possession may generally enter into transactions and use estate property in the ordinary course of
business without first obtaining the bankruptcy court’s approval.182 However, any action the
debtor-in-possession takes outside the ordinary course of business typically “requires notice,
hearing and court approval” in advance.183 An action “outside the ordinary course of business”
includes any transaction “that might be considered unusual, controversial, or questionable for the
debtor to undertake during its Chapter 11 case,”184 like a sale of “substantially all the debtor’s
assets.”185 The “ordinary course of business” standard provides the debtor-in-possession “the
flexibility to engage in ordinary transactions without unnecessary creditor and bankruptcy court
oversight, while protecting creditors by giving them an opportunity to be heard when transactions
are not ordinary.”186
The Chapter 11 Plan
As noted above, “the primary goal of Chapter 11” is “to formulate a comprehensive
reorganization plan that will ultimately rehabilitate financially distressed debtors.”187 Ideally, a
Chapter 11 plan is a product of negotiation between the debtor and its key stakeholders188 that

affairs of the debtor by current management,” the bankruptcy court may order the appointment of a trustee to
administer the debtor’s Chapter 11 case. 11 U.S.C. § 1104(a). “‘The appointment of a trustee divests the management
of the debtor of authority to execute its former role as head of the debtor,’ and the debtor acts through the trustee’s
authority.” E.g., South Edge LLC v. JPMorgan Chase Bank, N.A., Nos. 2:11-CV-00240-PMP-RJJ, 2:11-CV-00301-
PMP-RJJ, 2011 WL 1626567, at *3 (D. Nev. Apr. 28, 2011) (quoting Kranzdorf v. Alter (In re Fid. Am. Fin. Corp.), 63
B.R. 995, 998 (Bankr. E.D. Pa. 1986)).
178 Marvel, 140 F.3d at 471 (quoting In re V. Savino Oil & Heating Co., 99 B.R. 518, 524 (Bankr. E.D.N.Y. 1989)).
179 See 11 U.S.C. §§ 1107-1108.
180 Lucian Arye Bebchuk & Jesse M. Fried, A New Approach to Valuing Secured Claims in Bankruptcy, 114 HARV. L.
REV. 2386, 2402 n.56 (2001).
181 See, e.g., 11 U.S.C. § 363(c)(2) (special rules governing the use and sale of “cash collateral”).
182 E.g., In re Telesphere Commc’ns, Inc., 148 B.R. 525, 530 (Bankr. N.D. Ill. 1992); 11 U.S.C. §§ 363(c)(1), 364(a).
183 Morris v. Family Motors, Inc. (In re Dooley’s Rainwater Conditioning, Inc.), Bankr. No. 10-14145, Adv. No. 12-
5063, 2012 WL 6737501, at *3 (Bankr. D. Kan. Dec. 27, 2012). Accord, e.g., 11 U.S.C. §§ 363(b)(1), 364(b).
184 E.g., In re Husting Land & Dev., Inc., 255 B.R. 772, 778-79 (Bankr. D. Utah 2000).
185 See, e.g., In re Med. Software Sols., 286 B.R. 431, 439-40 (Bankr. D. Utah 2002).
186 E.g., In re Roth Am., Inc., 975 F.2d 949, 952 (3d Cir. 1992).
187 E.g., Tamir v. U.S. Trustee, 566 B.R. 278, 283 (D. Me. 2016).
188 E.g., In re AG Consultants Grain Div., Inc., 77 B.R. 665, 671 (N.D. Ind. 1987) (“Chapter 11 is essentially, or should
be, a negotiated process; a system to induce compromise.”); Harry D. Lewis, Enjoining Regulatory Action Against
Chapter 11 Debtors, 96 COM. L.J. 335, 351 (1991) (“The Chapter 11 process contemplates that all interested parties
participate to negotiate a Chapter 11 plan which will . . . reorganize . . . the Chapter 11 debtor in an orderly fashion.”).
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adjusts “the rights and obligations among the debtor and its debt- and equityholders . . . so as to
render the reorganized debtor a viable economic entity.”189
The debtor may file a proposed Chapter 11 plan at any time.190 Although an interested party to the
bankruptcy case, such as a creditor, may potentially file a proposed Chapter 11 plan of its own,
the Bankruptcy Code circumscribes a non-debtor’s ability to propose a Chapter 11 plan in several
respects.191 To name but one example, the Bankruptcy Code establishes an initial exclusivity
period during which “only the debtor may file a plan.”192
Among other requirements,193 a proposed plan must:
 divide similarly situated debt-holders and equityholders into separate
“classes.”194
 identify which classes will have their claims “impaired” by the plan.195 “A class
is impaired if there is ‘any alteration of a creditor’s rights, no matter how
minor.’”196
 specify how the plan will alter the claims belonging to the impaired classes.197
 treat every entity in a given class the same as other class members (unless a
particular claimant agrees to less favorable treatment).198
 provide adequate means for the plan’s implementation,199 such as by allowing the
debtor to retain certain property;200 selling or transferring the debtor’s
property;201 satisfying or modifying liens;202 curing or waiving a default by the
debtor;203 and so forth.204

189 E.g., Tung, supra note 159, at 1690.
190 11 U.S.C. § 1121(a).
191 See generally id. § 1121(b)-(e).
192 Id. § 1121(b). The bankruptcy court “may for cause reduce or increase the” exclusivity period so long as the period
does not extend beyond certain statutorily defined limits. See id. § 1121(d). Small business cases under Chapter 11 are
governed by slightly different exclusivity requirements. See id. § 1121(e).
193 See generally id. § 1123(a).
194 Id. § 1123(a)(1) (requiring the plan to “designate . . . classes of claims”); id. § 1122 (providing, with certain
exceptions, that “a plan may place a claim or an interest in a particular class only if such claim or interest is
substantially similar to the other claims or interests of such class”).
195 Id. § 1123(a)(2) (requiring the plan to “specify any class of claims or interests that is not impaired under the plan”);
id. § 1123(a)(3) (requiring the plan to “specify the treatment of any class of claims or interests that is impaired under
the plan”); id. § 1124 (defining “impaired”); id. § 1123(b)(1) (“A plan may . . . impair or leave unimpaired any class of
claims . . . or of interests.”).
196 In re Woodbrook Assocs., 19 F.3d 312, 321 n.10 (7th Cir. 1994) (quoting In re Windsor on the River Assocs., Ltd.,
7 F.3d 127, 130 (8th Cir. 1993)). Accord, e.g., In re Armstrong World Indus., Inc., 432 F.3d 507, 511 n.2 (3d Cir. 2005)
(“A class is impaired if its legal, equitable, or contractual rights are altered under the reorganization plan.”).
197 11 U.S.C. § 1123(a)(3).
198 Id. § 1123(a)(4).
199 Id. § 1123(a)(5).
200 Id. § 1123(a)(5)(A).
201 Id. § 1123(a)(5)(B), (D).
202 Id. § 1123(a)(5)(E).
203 Id. § 1123(a)(5)(G). See also id. § 1123(d) (“If it is proposed in a plan to cure a default the amount necessary to cure
the default shall be determined in accordance with the underlying agreement and applicable nonbankruptcy law.”).
204 See generally id. § 1123(a)(5).
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After a party proposes a plan, creditors who are adversely affected by the plan205 may then vote in
favor of or against it.206 Generally,207 in order to facilitate the voting process, “a proponent of a
plan must also submit a disclosure statement”208 that gives parties potentially affected by the plan
“information sufficient to enable” them “to make an informed judgment . . . as to whether they
should vote in favor of the plan.”209 The bankruptcy court will then “fix a time within which”
creditors may vote on the plan.210 Voting creditors must submit their votes in writing to the plan
proponent’s attorney prior to the deadline established by the court.211 A class of creditors has
accepted—that is, voted in favor of—a proposed plan if “creditors . . . that hold at least two-thirds
in amount and more than one-half in number of the allowed claims of such class” have voted in
favor of the plan.212
After the voting deadline expires, the court must hold a hearing to decide whether the plan shall
become effective—that is, whether to “confirm” the plan.213 A bankruptcy court cannot confirm a
proposed Chapter 11 plan unless it satisfies not only the criteria enumerated in the bullet points
above,214 but also several additional prerequisites established by the Bankruptcy Code,215 the most
notable of which are discussed in the subsections that follow.
In the alternative, a debtor may propose a plan of liquidation under Chapter 11.216 Liquidating
under Chapter 11 may prove more advantageous both to the debtor and creditors, the former

205 Only impaired classes may vote on a proposed Chapter 11 plan; classes that are not impaired under the plan are
conclusively deemed to have accepted the plan and are therefore not entitled to vote on whether to accept or reject it.
See id. § 1126(f) (“A class that is not impaired under a plan, and each holder of a claim or interest of such class, are
conclusively presumed to have accepted the plan, and solicitation of acceptances with respect to such class from the
holders of claims or interests of such class is not required.”); In re Ultra Petroleum Corp., 943 F.3d 758, 761 (5th Cir.
2019); In re Edgefield Inn, LLC, 521 B.R. 116, 121 (Bankr. D.S.C. 2014) (“Unimpaired classes . . . have no vote in the
reorganization process.”).
206 11 U.S.C. § 1126(a).
207 But see id. § 1125(f) (providing for alternate procedures in small business cases).
208 In re Del. & Hudson Ry. Co., 124 B.R. 169, 174 (D. Del. 1991). See also 11 U.S.C. § 1125; FED. R. BANKR. P.
3016.
209 In re Huggins, No. BK12-42692-T, 2013 WL 4502825, at *2 (Bankr. D. Neb. Aug. 22, 2013). Accord, e.g., 11
U.S.C. § 1125; FED. R. BANKR. P. 3016.
210 FED. R. BANKR. P. 3017(c). Accord FED. R. BANKR. P. 3018(a) (“A plan may be accepted or rejected in accordance
with § 1126 of the Code within the time fixed by the court pursuant to Rule 3017.”).
211 FED. R. BANKR. P. 3018(a), (c); Official Bankruptcy Forms B 314 (form ballot for accepting or rejecting plan of
reorganization, which specifies that the creditor should return the completed ballot to the “proponent’s attorney” or
another “appropriate address”).
212 11 U.S.C. § 1126(c). But see id. § 1126(c), (e) (authorizing the court to disregard the vote of any creditor “whose
acceptance or rejection of” a proposed “plan was not in good faith”).
213 Id. § 1128(a).
214 See id. § 1129(a)(1) (“The court shall confirm a plan only if . . . the plan complies with the applicable provisions of
this title.”); id. § 1123(a) (listing criteria that “a plan shall” satisfy).
215 See generally id. § 1129 (listing the requirements a proposed plan must satisfy). Accord, e.g., In re Chadda, No. 07-
12665bif, 2007 WL 3407375, at *3 (Bankr. E.D. Pa. Nov. 9, 2007) (“Confirmation of a chapter 11 plan requires that
the plan proponent meet all the requirements of section 1129(a) [of the Bankruptcy Code], except that of 1129(a)(8) . . .
If all the provisions of section 1129(a) are established, save that of section 1129(a)(8), then the plan proponent can seek
confirmation under section 1129(b).”).
216 11 U.S.C. § 1123(b)(4) (stating that a plan may “provide for the sale of all or substantially all of the property of the
estate.”).
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because it will liquidate under more “economically advantageous” circumstances, and the latter
because they may take a more active role in the liquidation process.217
Best Interests of Creditors
“[A] Chapter 11 reorganization plan may not be confirmed unless it satisfies the ‘best interests of
creditors’ test.”218 “This test requires that each holder of an impaired claim or interest either
accept the plan or receive under the plan not less than it would receive in a Chapter 7
liquidation.”219 “This means that, absent consent, a creditor must receive property that has a
present value equal to that participant’s hypothetical chapter 7 distribution if the debtor were
liquidated instead of reorganized on the plan’s effective date.”220 As a result, because having, for
example, a dollar in hand today is typically more valuable than receiving that same dollar several
years from now, “a Chapter 11 plan does not satisfy the best-interests-of-creditors test if the
debtor, rather than paying a creditor the amount it would receive in a Chapter 7 liquidation in full
on the effective date of the plan, proposes instead to pay that same amount over time.”221 Where,
by contrast, impaired creditors would receive nothing in a hypothetical Chapter 7 liquidation, the
plan will likely satisfy the best interests of creditors test because a Chapter 11 plan
mathematically cannot pay creditors less than zero.222
Feasibility
Additionally, “to be confirmed, every chapter 11 plan must be ‘feasible.’”223 This means that the
plan proponent must show that “confirmation of the plan is not likely to be followed by the
liquidation, or the need for further financial reorganization, of the debtor . . . unless such
liquidation or reorganization is proposed in the plan.”224 In other words, a plan is feasible not
when it guarantees success but when it “offers a reasonable assurance of success.”225 “The
purpose of this feasibility requirement is to prevent confirmation of unrealistic plans which
promise creditors and equity security holders more than the debtor can likely attain after
confirmation.”226 A plan is infeasible, for example, if it proposes to “keep creditors ‘on hold’
without receipt of payments while the debtor seeks to sell real estate which it has been unable to

217 Admin. Office of U.S. Courts, Chapter 11 - Bankruptcy Basics, https://www.uscourts.gov/services-
forms/bankruptcy/bankruptcy-basics/chapter-11-bankruptcy-basics (last visited Sept. 29, 2022).
218 ReGen Capital I, Inc. v. Halperin (In re U.S. Wireless Data, Inc.), 547 F.3d 484, 495 (2d Cir. 2008). Accord, e.g., 11
U.S.C. § 1129(a)(7).
219 Regen, 547 F.3d at 495. Accord, e.g., In re Monticello Realty Invs., LLC, 526 B.R. 902, 914 (Bankr. M.D. Fla.
2015) (“The plan proponent must prove that each rejecting claimant in an impaired class will receive no less in the
Chapter 11 than the claimant would have received if the debtor were liquidated in Chapter 7.”); 11 U.S.C. § 1129(a)(7).
220 In re SAI Holdings Ltd., No. 06-33227, 2007 WL 927936, at *7 (Bankr. N.D. Ohio Mar. 26, 2007) (quoting 7 ALAN
N. RESNICK ET AL., COLLIER ON BANKRUPTCY ¶ 1129.03[7][b] (15th ed. 2004)).
221 In re River Glen Land P’ship, Case No. 14-32732, 2015 WL 588696, at *8 (Bankr. E.D. Tenn. Feb. 11, 2015)
(quoting In re Hockenberry, 457 B.R. 646, 653-54 (Bankr. S.D. Ohio 2011)).
222 See, e.g., In re Friedman, No. 4:07-bk-02135-JMM, 2012 WL 5409194, at *5 (Bankr. D. Ariz. Nov. 5, 2012)
(confirming Chapter 11 plan where the estimated recovery for unsecured creditors in a hypothetical liquidation was
“zero”).
223 See In re Gentry, 807 F.3d 1222, 1225-26 (10th Cir. 2015); In re Chadda, No. 07-12665bif, 2007 WL 3407375, at
*3 (Bankr. E.D. Pa. Nov. 9, 2007).
224 11 U.S.C. § 1129(a)(11).
225 Gentry, 807 F.3d at 1225.
226 E.g., In re Renegade Holdings, Inc., Nos. 09-50140C-11W, 09-50141C-11W, 09-50143C-11W, 2013 WL 2353940,
at *8 (Bankr. M.D.N.C. May 29, 2013).
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sell in years past,” as “such plans are nothing more than speculative ventures which place all the
risk on the . . . creditors.”227
Cramdown
Nor may a bankruptcy court confirm a proposed Chapter 11 plan unless it either (1) satisfies a
requirement codified at Section 1129(a)(8) of the Bankruptcy Code that all classes of impaired
creditors accept the proposed plan; or (2) satisfies what are called the “cramdown” requirements
of Section 1129(b).228
“Section 1129(a)(8) can be satisfied only if each class” of creditors “under a proposed plan either
has accepted the plan or is not impaired under the plan.”229 Section 1129(a)(8) thereby requires
that a proposed plan “be consensual, with unanimous acceptance by all of the impaired
classes.”230
Nevertheless, “the failure to comply with § 1129(a)(8) is not fatal.”231 “A plan that does not
satisfy [§] 1129(a)(8) nonetheless can be confirmed”232 pursuant to Section 1129(b) if the plan
“does not discriminate unfairly, and is fair and equitable, with respect to each class of claims or
interests that is impaired under, and has not accepted, the plan.”233 In order for the court to deem a
plan “fair and equitable” for cramdown purposes, the plan must satisfy the “absolute priority
rule.”234 “That rule requires that, if a class of senior claim-holders will not receive the full value
of their claims under the plan and the class does not accept the plan, no junior [claim-holder] may
receive ‘any property’ ‘under the plan on account of such junior claim or interest.’”235 A senior
claim-holder is defined as a creditor holding a claim that is entitled to payment before other
claims in the hierarchy of distribution to creditors, whereas a junior claim-holder holds a claim
that is ranked lower in the hierarchy.236
Obtaining confirmation of a plan over the objection of impaired creditors in accordance with
Section 1129(b) is known as a “cramdown.”237 Many (though not all) commentators agree that
plan proponents utilize the Bankruptcy Code’s cramdown provisions relatively infrequently.238

227 In re S. Canaan Cellular Invs., Inc., 427 B.R. 44, 63 (Bankr. E.D. Pa. 2010) (quoting In re Calvanese, 169 B.R. 104,
107-08 (Bankr. E.D. Pa. 1994)).
228 E.g., In re Smith, 357 B.R. 60, 68 (Bankr. M.D.N.C. 2006); 11 U.S.C. § 1129(a)(8), (b).
229 E.g., Smith, 357 B.R. at 68.
230 E.g., In re Armstrong World Indus., Inc., 432 F.3d 507, 511 (3d Cir. 2005).
231 E.g., In re Frascella Enters., Inc., 360 B.R. 435, 452 (Bankr. E.D. Pa. 2007).
232 Smith, 357 B.R. at 68.
233 11 U.S.C. § 1129(b)(1).
234 See id. § 1129(b)(2)(A)-(B) (defining “fair and equitable”); DISH Network Corp. v. DBSD N. Am., Inc. (In re
DBSD N. Am., Inc.), 634 F.3d 79, 86 (2d Cir. 2011) (referring to 11 U.S.C. § 1129(b)(2)(B) as “the absolute priority
rule”).
235 DISH, 634 F.3d at 86 (quoting 11 U.S.C. § 1129(b)(2)(B)).
236 See In re Allied Consol. Indus., Inc., 569 B.R. 284, 295 (Bankr. N.D. Ohio 2017) (explaining that the absolute
priority rule requires “that the values represented by the higher-ranking claims are fully satisfied by the values
distributed under the [p]lan”).
237 E.g., In re Bryant, 439 B.R. 724, 740 (Bankr. E.D. Ark. 2010).
238 See Richard M. Hynes, Reorganization as Redemption, 6 VA. L. & BUS. REV. 183, 220 (2011) (noting the
“observation of empirical researchers that cramdown is extremely rare”); Adam J. Levitin, Bankruptcy Markets:
Making Sense of Claims Trading, 4 BROOK J. CORP. FIN. & COM. L. 67, 106 (2009) (“Cramdown plans, where a broad
negotiated deal could not be reached, continue to remain relatively rare.”). But see Scott Alberino et al., Corporate
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The Effect of Confirmation
A confirmed Chapter 11 plan binds the debtor, the creditors (including creditors who did not vote
in favor of the plan), and other parties.239 “Except as otherwise provided in the plan or the order
confirming the plan, the confirmation of a plan vests all of the property of the estate in the
debtor.”240 Additionally, the confirmation of a Chapter 11 plan “generally discharges the debtor
from its pre-confirmation debt and substitutes the obligations of the plan for the debtor’s prior
indebtedness.”241 This discharge operates as an injunction that, with some exceptions, prohibits
creditors from “commenc[ing] or continu[ing] an action, employ[ing] process, or act[ing], to
collect, recover, or offset any debt that was subject to discharge.”242 A creditor who violates the
discharge injunction is potentially subject to civil contempt proceedings.243
“A confirmed plan creates a new contract between the debtor and interested parties, which
replaces pre-petition obligations with a new contractual obligation in accordance with the
creditor’s treatment under the confirmed plan.”244 Thus, “where a debtor fails to make payments
or act in accordance with a confirmed plan, a creditor’s remedy may be for breach of contract or
suit to enforce the debtor’s obligation.”245
Small Business Reorganizations
Small-business debtors may avail themselves of two special Chapter 11 categories.246 First, under
BAPCPA, Congress added definitions to the Bankruptcy Code for “small business case” and
“small business debtor,” codified at 11 U.S.C. §§ 101(51C) and 101(51D), respectively.247
Second, Congress created a Chapter 11 variant with the passage of the Small Business
Reorganization Act of 2019; Chapter 11, subchapter V, reorganization of small business
debtors.248 A debtor may elect either of these two options, subject to certain eligibility criteria.249
Both types of bankruptcies are similar based on their accelerated timelines.250 They also are alike
in that a debtor cannot have its primary business be ownership of single asset real estate and it

Bankruptcy Panel Hot Chapter 11 Plan Issues, 28 EMORY BANKR. DEV. J. 283, 297 (2012) (“Most plans have to rely
upon the cramdown mechanism . . . to get confirmed.”).
239 11 U.S.C. § 1141(a).
240 Id. § 1141(b).
241 Lacy v. Stinky Love, Inc. (In re Lacy), 304 B.R. 439, 443-44 (D. Colo. 2004). Accord, e.g., 11 U.S.C. § 1141(c),
(d)(1).
242 In re Bahary, 528 B.R. 763, 767-68, 769, 772-73 (Bankr. N.D. Ill. 2015). See also, e.g., 11 U.S.C. § 524(a)(2). But
see 11 U.S.C. § 1141(d)(2)-(3) (establishing certain exceptions to discharge in Chapter 11 cases); Chemetron Corp. v.
Jones, 72 F.3d 341, 346 (3d Cir. 1995) (“Inadequate notice is a defect which precludes discharge of a claim in
bankruptcy.”).
243 E.g., Bahary, 528 B.R. at 767-68.
244 Little v. Clay (In re Clay), Bankr. No. 09-80909-TRC, Adv. No. 09-8039, 2010 WL 547165, at *2 (Bankr. E.D.
Okla. Feb. 10, 2010). Accord, e.g., Murdock v. Holquin, 323 B.R. 275, 282 (N.D. Cal. 2005) (“A Chapter 11 plan of
reorganization constitutes a new contract between a debtor and his or her creditors.”); 11 U.S.C. § 1141.
245 E.g., Little, 2010 WL 547165, at *2.
246 Chapter 11 - Bankruptcy Basics, supra note 217.
247 Robert M. Lawless, Small Business and the 2005 Bankruptcy Law: Should Mom and Apple Pie Be Worried?, 31 S.
ILL. U. L.J. 585, 588 (2007). Additional requirements for small business cases are found at 11 U.S.C. § 1125(e).
248 11 U.S.C. §§ 1181-1195.
249 Chapter 11 - Bankruptcy Basics, supra note 217.
250 Id.
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must not be a corporation or be an affiliate of a corporation that is subject to the reporting
requirements under Sections 13 or 15(d) of the Securities Exchange Act of 1934.251
The two types of bankruptcies differ, however, in several respects. The maximum amount of debt
to qualify for a subchapter V bankruptcy is more than twice that of a small business debtor.252
While a Chapter 11 trustee can be appointed for cause in a small business case,253 a subchapter V
trustee is appointed automatically.254 A small business debtor must file a plan within 300 days of
the filing date,255 whereas a subchapter V debtor must file a plan within 90 days.256 A small
business debtor must file a disclosure statement in most cases,257 while there are no disclosure
statements filed in subchapter V.258
Chapter 13 Consumer Cases
The purpose of Chapter 13 of the Bankruptcy Code—titled “Adjustment of Debts of an Individual
With Regular Income”—“is to enable an individual, under court supervision and protection, to
develop and perform under a plan for the repayment of his debts.”259 The plan may call for full
repayment or, in the alternative, it may provide for creditors’ receiving a portion of their claims.260
A debtor may not file for bankruptcy under Chapter 13 unless the debtor is an “individual with
regular income” who owes a total amount of debt that does not exceed a maximum debt threshold
established by statute.261 Thus, a non-individual debtor, such as a corporation or limited liability
company, may not file for bankruptcy under Chapter 13.262

251 Jonathan P. Friedland, What is the difference between a small business debtor and a Subchapter V Debtor?, in
STRATEGIC ALTERNATIVES FOR AND AGAINST DISTRESSED BUSINESSES § 5:7; see In re Tibbens, No. 19-80664, 2021 Wl
1087260, at *6 (Bankr. M.D.N.C. Mar. 19, 2021).
252 11 U.S.C. §§ 101(51D) ($3,024,725), 1182 ($7,500,000).
253 Id. § 1104.
254 Id. § 1183.
255 Id. § 1121(e).
256 Id. § 1189(b).
257 Id. § 1125(f).
258 Id. § 1181(b).
259 In re Pierre, 468 B.R. 419, 424-25 (Bankr. M.D. Fla. 2012) (quoting H.R. REP. NO. 95-595, 95th Cong., 1st Sess.
118 (1977)); see also Branigan v. Bateman (In re Bateman), 515 F.3d 272, 275 n.2 (4th Cir. 2008) (Chapter 13 “is
essentially a reorganization that allows the debtor to ‘deal comprehensively with’” his or her debts) (quoting ALAN N.
RESNICK & HENRY J. SOMMER, 8 COLLIER ON BANKRUPTCY ¶ 1300.01).
260 Pierre, 468 B.R. at 424-25.
261 11 U.S.C. § 109(e) (“Only an individual with regular income that owes, on the date of the filing of the petition,
noncontingent, liquidated debts of less than $2,750,000 or an individual with regular income and such individual’s
spouse, except a stockbroker or a commodity broker, that owe, on the date of the filing of the petition, noncontingent,
liquidated debts that aggregate less than $2,750,000 may be a debtor under Chapter 13.”). These dollar figures adjust
automatically every three years “to reflect the change in the Consumer Price Index for All Urban Consumers[]
published by the Department of Labor.” Id. § 104(a).
See also id. § 101(30) (“The term ‘individual with regular income’ means individual whose income is sufficiently
stable and regular to enable such individual to make payments under a plan under chapter 13 . . . other than a
stockbroker or a commodity broker.”); id. § 109(g)-(h) (establishing additional eligibility requirements for individual
debtors).
262 See, e.g., In re JAC Family Found., 356 B.R. 554, 557 (Bankr. N.D. Ga. 2006).
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Unlike a Chapter 7 case, the debtor in a Chapter 13 case “remains in possession of the property of
the estate.”263 In another difference from proceedings governed by Chapter 7, “where a debtor’s
nonexempt assets are sold to pay creditors, Chapter 13 permits debtors to keep assets such as their
home and car so long as they . . . comply with their obligations under their confirmed plan of
reorganization.”264 Chapter 13 thereby potentially permits a debtor “to save his or her home from
foreclosure by curing a mortgage default and, while continuing to pay the mortgage obligation as
installments come due, curing” arrearages that the debtor incurred before he filed bankruptcy.265
For that reason, eligible debtors who own homes may prefer filing under Chapter 13 instead of
filing under Chapter 7.266
Notwithstanding the differences between Chapter 13 and Chapter 7, Chapter 13 cases are similar
to Chapter 7 cases to the extent that a case trustee administers both types of proceedings. In many
judicial districts, the U.S. Trustee267 appoints standing Chapter 13 trustees who “oversee all
Chapter 13 cases filed in” their respective districts.268 Among other duties,269 the Chapter 13
trustee:
 ensures “that the debtor commences making timely payments” that will be
distributed to creditors;270
 receives monthly payments made by debtors and distributes the proceeds to
creditors;271 and
 investigates the debtor’s financial affairs.272
Chapter 13 cases are also similar to Chapter 11 cases to the limited extent that both ideally result
in the confirmation of a plan that alters the debtor’s relationships with creditors.273 Among other
requirements,274 a Chapter 13 plan must propose “to use future income to repay a portion (or in
the rare case all) of” the debtor’s “debts over the next three to five years.”275 Only the debtor may

263 Smith v. Rockett, 522 F.3d 1080, 1081 (10th Cir. 2008). Accord, e.g., 11 U.S.C. § 1306(b) (“Except as provided in a
confirmed plan or order confirming a plan, the debtor shall remain in possession of all property of the estate.”).
264 In re Blendheim, 803 F.3d 477, 485 (9th Cir. 2015).
265 In re McKinney, 344 B.R. 1, 3-4 (Bankr. D. Me. 2006) (analyzing 11 U.S.C. § 1322(b)-(c)).
266 Katherine Porter, Life After Debt: Understanding the Credit Restraint of Bankruptcy Debtors, 18 AM. BANKR. INST.
L. REV. 1, 9 n.32 (2010).
267 28 U.S.C. § 586(b) (“If the number of cases under chapter . . . 13 of title 11 commenced in a particular region so
warrants, the United States trustee for such region may . . . appoint one or more individuals to serve as standing
trustee.”); 11 U.S.C. § 1302(a) (“If the United States trustee appoints an individual under section 586(b) of title 28 to
serve as standing trustee in cases under this chapter . . . then such individual shall serve as trustee in the case.”).
268 Austin, supra note 34, at 1093.
269 See generally 11 U.S.C. § 1302.
270 Id. § 1302(b)(5).
271 See Austin, supra note 34, at 1093. Accord, e.g., 11 U.S.C. § 1326(c) (“Except as otherwise provided in the plan or
in the order confirming the plan, the trustee shall make payments to creditors under the plan.”).
272 11 U.S.C. §§ 1302(b)(1), 704(a)(4).
273 See, e.g., In re Childs, 466 B.R. 924, 926 (Bankr. S.D. Tex. 2012) (“Chapter 13 cases are similar to Chapter 11
cases—at least insofar as plans are confirmed and thereafter implemented.”). But see In re Fielding, Case No. 13-
43212-DML-13, 2015 WL 1676877, at *4 (Bankr. N.D. Tex. Apr. 10, 2015) (noting “inherent differences between a
plan proposed under chapter 11 as opposed to one proposed under chapter 13”).
274 See generally 11 U.S.C. §§ 1322(a), 1325; FED. R. BANKR. P. 3015(c). See also In re Blendheim, 803 F.3d 477, 485-
86 (9th Cir. 2015) (discussing “mandatory provisions which all Chapter 13 plans must contain in order to qualify for
confirmation”).
275 Bullard v. Blue Hills Bank, 575 U.S. 496, 498 (2015). See also, e.g., 11 U.S.C. § 1322(a)(1) (“The plan . . . shall
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file a proposed plan under Chapter 13.276 “Unlike Chapter 11, creditors in a Chapter 13 case are
not allowed to vote on a proposed plan,”277 though the Chapter 13 trustee or certain parties with a
pecuniary interest in the Chapter 13 case may object to a proposed plan that does not comply with
certain requirements established by the Bankruptcy Code.278 “If an unsecured creditor or the
bankruptcy trustee objects to confirmation” of the proposed plan, Chapter 13 “requires the debtor
either to pay unsecured creditors in full or pay all ‘projected disposable income’ to be received by
the debtor over the duration of the plan”; otherwise, the “bankruptcy court may not approve the
plan.”279 If the proposed plan complies with Chapter 13’s requirements, “the court shall confirm”
it.280 “The provisions of a confirmed plan” under Chapter 13 “bind the debtor and each
creditor.”281
Generally speaking, “all payments to creditors must be made through the Chapter 13 trustee.”282
That is, “the Chapter 13 Trustee must collect payments as provided in the plan” from the debtor
“and must distribute those payments” to creditors “as provided in the plan.”283 “During the
repayment period, creditors may not harass the [d]ebtor or seek to collect their debts. They must
receive payments only under the plan.”284
“With certain exceptions . . . when a chapter 13 debtor completes all payments under a chapter 13
plan, the Court must grant the debtor a discharge of all debts provided for by the plan.”285 Thus,
“unlike the chapter 7 discharge, which is typically granted relatively quickly, the chapter 13

provide for the submission of all or such portion of future earnings or other future income of the debtor to the
supervision and control of the trustee as is necessary for the execution of the plan.”); id. § 1322(d) (governing the
permissible length of a Chapter 13 plan).
276 See, e.g., 11 U.S.C. § 1321 (“The debtor shall file a plan.”); In re Ellsworth, 455 B.R. 904, 916 (B.A.P. 9th Cir.
2011) (“A chapter 13 debtor . . . unlike a chapter 11 debtor, is the only entity that may file a plan.”).
277 In re Mason, 456 B.R. 245, 249 (Bankr. N.D. W.Va. 2011). Accord, e.g., In re Brisco, 502 B.R. 212, 218 (Bankr.
N.D. Ill. 2013) (“Chapter 13 creditors do not vote on a chapter 13 plan.”).
278 See, e.g., 11 U.S.C. § 1324 (“A party in interest may object to confirmation of [a proposed Chapter 13] plan.”); In re
Lilienthal, No. BK09-80928-TLS, 2009 WL 3103735, at *1 (Bankr. D. Neb. Sept. 23, 2009) (sustaining Chapter 13
trustee’s objection that debtors’ proposed plan violated 11 U.S.C. § 1325(a)(3)); In re Shelton, 428 B.R. 457, 461
(Bankr. N.D. Ohio 2010) (“Where a creditor finds its treatment in a debtor’s proposed plan to be improper, the Code
contemplates that the creditor bring the matter to the Court’s attention by filing an objection.”); In re McDonald, 508
B.R. 187, 198 (Bankr. D. Colo. 2014) (holding that “anyone who has an interest in the property to be administered and
distributed under the Chapter 13 plan” is a “party in interest” who may object to a proposed plan under 11 U.S.C.
§ 1324) (quoting Davis v. Mather (In re Davis), 239 B.R. 573, 579 (B.A.P. 10th Cir. 1999)).
279 Hamilton v. Lanning, 560 U.S. 505, 508-09 (2010) (quoting 11 U.S.C. § 1325(b)(1)).
280 11 U.S.C. § 1325(a). Accord, e.g., In re Colcord, Case No. 15-46941, 2015 WL 5461543, at *1 (Bankr. E.D. Mich.
Sept. 16, 2015) (“A bankruptcy court must confirm a plan that complies with the applicable provisions of Chapter
13.”).
281 11 U.S.C. § 1327(a).
282 In re Curran, No. 09-27858-svk, 2009 WL 2591640, at *1 (Bankr. E.D. Wis. Aug. 20, 2009).
283 In re Idlett, No. 09-60169, 2009 WL 4756260, at *1 (Bankr. S.D. Tex. Dec. 8, 2009).
284 Schwindler v. Screen (In re Screen), No. 04-40615, 2004 WL 6044672, at *1 (Bankr. S.D. Ga. May 20, 2004)
(quoting H.R. REP. NO. 95-595, at 118 (1977)).
285 In re Hornstra, No. 03-40528, 2007 WL 1428737, at *1 (Bankr. D.S.D. May 11, 2007). Accord, e.g., 11 U.S.C.
§ 1328 (providing, with certain exceptions, that “the court shall grant the debtor a discharge of” many types of debts
“as soon as practicable after completion by the debtor of all payments under the plan”).
The discharge in Chapter 13 affords the debtor relief from a wider variety of debts than a Chapter 7 discharge would
cover. E.g., In re Self, No. 06-40228, 2009 WL 2969489, at *7 (Bankr. D. Kan. Sept. 11, 2009) (“There are distinct
advantages in filing a Chapter 13 proceeding over a Chapter 7 proceeding, such as obtaining a broader discharge of
debts.”). Compare 11 U.S.C. § 1328 (delineating the scope of a Chapter 13 discharge), with id. § 727(b) (delineating
the scope of a Chapter 7 discharge).
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debtor must, in most situations, successfully complete all plan payments before they may be
granted a discharge.”286
If, however, the “debtor fails to make timely payments under his plan,” the Chapter 13 trustee
may (1) ask the court to either (i) dismiss the case or (ii) convert it to a Chapter 7 liquidation; or
(2) seek modification of the plan.287 Dismissal of a Chapter 13 case usually “provide[s] no relief
for the debtor, as it generally restores the debtor to the status quo ante.”288 When the court
dismisses a debtor’s Chapter 13 case, the automatic stay “terminate[s] by operation of law,” and
the debtor’s creditors may once again attempt to collect their outstanding debts to the extent they
have not already been paid through the plan.289
“Because Chapter 7 provides a quicker discharge of the debtor’s obligations” than Chapter 13,
many debtors would “typically prefer” to file under Chapter 7 rather than Chapter 13,290
especially debtors who do not own a home that Chapter 13 could protect.291 Debtors may also
“prefer to file chapter 7 when their debts overwhelmingly outweigh their assets,” as Chapter 7
allows debtors to discharge debts without pledging their future income to creditors.292
On the other hand, “unsecured creditors often receive more money under successful Chapter 13
plans than they would under a Chapter 7 liquidation bankruptcy,”293 and some “policymakers
prefer Chapter 13 to Chapter 7 because it includes an acknowledgement by filers to pay as much
of their debts as they can, whereas Chapter 7 filers are asking to be relieved of the burden of
paying anything towards the debts they have incurred.”294 For those reasons, “an individual
debtor . . . whose debts are primarily consumer debts” is ineligible for Chapter 7 relief if his
current monthly income, reduced by certain allowable expenses, exceeds statutory thresholds
established by the Bankruptcy Code.295 As mentioned above,296 this eligibility provision is called

286 In re Okosisi, 451 B.R. 90, 94 (Bankr. D. Nev. 2011). Accord, e.g., 11 U.S.C. § 1328.
287 Ferrell v. Countryman, 398 B.R. 857, 868 (E.D. Tex. 2009) (quoting Jutila v. Rodgers (In re Jutila), 111 B.R. 621,
624 (W.D. Mich. 1989)). Accord, e.g., 11 U.S.C. § 1307 (authorizing the court to “convert a case under [Chapter 13] to
a case under chapter 7” or dismiss the case); id. § 1329(a) (“At any time after confirmation of the plan but before the
completion of payments under such plan, the plan may be modified, upon request of . . . the trustee.”).
288 Alan M. Ahart, Whether to Grant a Hardship Discharge in Chapter 13, 87 AM. BANKR. L.J. 559, 559 (2013).
289 In re McNair, No. 05-12064, 2007 WL 831824, at *1 (Bankr. M.D. Ala. Jan 12, 2007). Accord, e.g., 11 U.S.C.
§ 362(c)(2)(B) (providing that the dismissal of a case terminates the automatic stay).
290 Shaun Mulreed, In re Blair Misses the Mark: An Alternative Interpretation of the BAPCPA’s Homestead Exemption,
43 SAN DIEGO L. REV. 1071, 1075 (2006).
291 Porter, supra note 266, at 9 n.32 (“Fewer homeowners file chapter 7 bankruptcy; many prefer chapter 13 bankruptcy
because it provides specific benefits to homeowners who may be in arrears on their mortgage loans.”).
292 Joseph W. Doherty, One Client, Different Races: Estimating Racial Disparity in Chapter Choice Using Matched
Pairs of Debtors, 20 AM. BANKR. INST. L. REV. 651, 668 (2012).
293 McDonald v. Master Fin., Inc. (In re McDonald), 205 F.3d 606, 614 (3d Cir. 2000).
294 Robert J. Landry, III, An Empirical Analysis of the Causes of Consumer Bankruptcy: Will Bankruptcy Reform Really
Change Anything?, 3 RUTGERS BUS. L.J. 2, 48 n.175 (2006).
295 11 U.S.C. § 707(b)(1)-(2). Accord, e.g., In re Arndt, Case No. 17-30226, 2017 WL 5164141, at *3 (Bankr. N.D.
Ohio Nov. 6, 2017); In re Ralston, 400 B.R. 854, 856 (Bankr. M.D. Fla. 2009). See also Official Bankruptcy Form
122A-2 (Chapter 7 Means Test Calculation form); 11 U.S.C. § 104(a) (providing that 11 U.S.C. § 707(b)’s dollar limits
automatically adjust every three years “to reflect the change in the Consumer Price Index for All Urban Consumers[]
published by the Department of Labor”).
296 See supra “Individual Debtors.”
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the “means test,”297 and it is “designed to force some debtors into chapter 13 when they would
prefer chapter 7.”298
Chapter 12 Family Farmer/Family Fisherman Cases
Chapter 12 of the Bankruptcy Code299 offers a form of bankruptcy relief that is “similar to that
available” to individual consumers “under chapter 13,”300 but is only available to family farmers
and family fishermen with regular annual income.301 Although Chapter 12 is infrequently
utilized,302 Chapter 12 exists to give family farmers and family fishermen “a chance to reorganize
their debts and keep their farms while preserving the fair treatment of creditors.”303 To that end,
“a Chapter 12 debtor has the right to continue to operate the farm [or fishing] business” during
the pendency of the bankruptcy case.304
To qualify as a “family farmer” or “family fisherman” within the meaning of Chapter 12, the
debtor must satisfy a complicated series of statutory prerequisites.305 Among other requirements,
the debtor’s aggregate debt must not exceed certain statutory limits, and a statutorily defined
percentage of the debtor’s debts must arise out of a farming operation or commercial fishing
operation.306
“Chapter 12 was modeled on chapter 13,” and as a result “many of the provisions” of both
Chapters “are identical.”307 Most pertinently, Chapter 12 debtors may “preserve existing assets
subject to a ‘court-approved plan under which they pay creditors out of their future income’” like
Chapter 13 debtors.308 Nevertheless, “there are significant differences between Chapter 12 and
Chapter 13.”309 To name just one example, Chapter 13 “is substantially less permissive than

297 E.g., In re Fredman, 471 B.R. 540, 542 (Bankr. S.D. Ill. 2012) (“With the enactment of the Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005 (BAPCPA), 11 U.S.C. § 707(b) was amended to add a screening
mechanism, known as the ‘means test.’ The purpose of the means test is to weed out chapter 7 debtors who are capable
of funding a chapter 13 case.”).
298 William C. Whitford, A History of the Automobile Lender Provisions of BAPCPA, 2007 U. ILL. L. REV. 143, 156.
See also McDonald, 205 F.3d at 614 (“Courts have repeatedly emphasized Congress’s preference that individual
debtors use Chapter 13 instead of Chapter 7.”).
299 11 U.S.C. §§ 1201-1232.
300 E.g., First Brandon Nat’l Bank v. Kerwin (In re Kerwin), 996 F.2d 552, 559-560 (2d Cir. 1993).
301 See 11 U.S.C. § 109(f) (“Only a family farmer or family fisherman with regular annual income may be a debtor
under Chapter 12.”).
302 Katherine M. Porter, Phantom Farmers: Chapter 12 of the Bankruptcy Code, 79 AM. BANKR. L.J. 729, 740-47
(2005) (noting that “Chapter 12 has been rarely used” and positing reasons why Chapter 12 filings may be relatively
infrequent).
303 E.g., In re Pertuset, 492 B.R. 232, 259 (Bankr. S.D. Ohio 2012).
304 In re Eckberg, 446 B.R. 909, 918 (Bankr. C.D. Ill. 2011). Accord, e.g., 11 U.S.C. § 1203 (granting the debtor the
right to “operat[e] the debtor’s farm or commercial fishing operation”).
305 See 11 U.S.C. § 101(18)-(19B).
306 Id. § 101(18)(A), (18)(B)(ii), (19A)(A)(i), (19A)(B)(ii)(II).
307 Hall v. United States, 566 U.S. 506, 516 (2012) (quoting HENRY J. SOMMER & RICHARD LEVIN, 8 COLLIER ON
BANKRUPTCY ¶ 1200.01[5] (16th ed. 2011)). See also In re LaRosa Greenhouse, LLP, 565 B.R. 304, 309-10 (Bankr.
D.N.J. 2017) (listing ways in which Chapters 12 and 13 are similar).
308 Hall, 566 U.S. at 509 (quoting Hamilton v. Lanning, 560 U.S. 505, 508 (2010)). See also, e.g., Baker v. Baker (In re
Baker), Bankr. Case No. 10-70221-HDH-12, Civil Action No. 7:13-CV-00049-O, 2014 WL 1373471, at *2 (N.D. Tex.
Apr. 8, 2014) (“Chapter 12 of the Bankruptcy Code allows farmer debtors with regular annual income to adjust their
debts subject to a reorganization plan.”).
309 Cohen v. Lopez (In re Lopez), 372 B.R. 40, 45-46 (B.A.P. 9th Cir. 2007).
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Chapter 12 regarding the scope of allowed modifications of secured debt, particularly regarding
modifications of claims secured by residences.”310
Chapter 9 Municipality Cases
Chapter 9 of the Bankruptcy Code authorizes certain municipal debtors311 to restructure their
debts so that they may “provide adequate municipal services” to residents.312 Because
municipalities provide essential services to their residents, such as police protection, fire
protection, garbage removal, and the like,313 a “municipality cannot be liquidated, its assets sold,
and the proceeds used to pay its creditors.”314 Chapter 9 therefore permits municipalities to adjust
their debts pursuant to a confirmed adjustment plan,315 “which fosters the continuance of
municipalities rather than their dissolution.”316
“The general policy considerations underlying the municipal debt adjustment plan of chapter 9
are the same as that of chapter 11 reorganization: to give the debtor a breathing spell from debt
collection efforts and establish a repayment plan with creditors.”317 However, unlike Chapter 11,
“the entire structure of chapter 9 has been influenced by th[e] pervasive concern to preserve the
niceties of the state-federal relationship.”318 To that end, Chapter 9 restricts the bankruptcy court’s
ability to “interfere with the political or governmental powers of the petitioner, the property or
revenue of the petition, or any income-producing powers” in order to preserve “the sovereignty of
the states.”319 Additionally, to avoid further “encroaching on state sovereignty,” there is little to no
role for a case trustee in a Chapter 9 case.320

310 Id.
311 See 11 U.S.C. § 109(c) (establishing requirements a municipality must fulfill in order to declare bankruptcy under
Chapter 9). Among other requirements, a municipality “may be a debtor under chapter 9” of the Bankruptcy Code “if
and only if such entity . . . is specifically authorized . . . to be a debtor under such chapter by State law, or by a
governmental officer or organization empowered by State law to authorize such entity to be a debtor under such
chapter.” Id. § 109(c)(2). “Some states outright prohibit municipalities from availing themselves of chapter 9
protection; others provide express and unconditional or express but qualified authorization.” Diane Lourdes Dick,
Bondholders v. Retirees in Municipal Bankruptcies: The Political Economy of Chapter 9, 92 AM. BANKR. L.J. 73, 79
(2017).
312 In re City of Detroit, Mich., 524 B.R. 147, 256 (Bankr. E.D. Mich. 2014).
313 E.g., In re Addison Cmty. Hosp. Auth., 175 B.R. 646, 648 (Bankr. E.D. Mich. 1994).
314 Franklin High Yield Tax-Free Income Fund v. City of Stockton, Cal. (In re City of Stockton, Cal.), 542 B.R. 261,
284 (B.A.P. 9th Cir. 2015) (quoting ALAN N. RESNICK & HENRY J. SOMMER, 6 COLLIER ON BANKRUPTCY ¶ 943.03[7][a]
(16th ed. 2011)).
315 11 U.S.C. §§ 941, 943.
316 Addison, 175 B.R. at 648.
Note also that the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) contains a
subchapter that authorizes certain territorial entities to adjust their debts and resembles Chapter 9 of the Bankruptcy
Code. See 48 U.S.C. §§ 2101-2241.
317 Addison, 175 B.R. at 649.
318 Ass’n of Retired Emps. of City of Stockton v. City of Stockton, Cal. (In re City of Stockton, Cal.), 478 B.R. 8, 20
(Bankr. E.D. Cal. 2012).
319 Addison, 175 B.R. at 649 (quoting 121 CONG. REC. H39409-10 (1975) (statement of Rep. Edwards)). See also, e.g.,
11 U.S.C. § 903 (providing that Chapter 9 “does not limit or impair the power of a State to control, by legislation or
otherwise, a municipality of or in such State in the exercise of the political or governmental powers of such
municipality, including expenditures for such exercise”); id. § 904 (limiting the court’s jurisdiction and power in
Chapter 9 cases).
320 Stockton, 478 B.R. at 20. Accord 11 U.S.C. § 901(a) (providing that Chapter 11’s provisions governing the
appointment of a trustee do not apply in Chapter 9); id. § 926(a) (providing that “the court may appoint a trustee” in a
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Although Chapter 9 bankruptcies are relatively infrequent, some commentators predict that
municipal bankruptcies could potentially become more common in the future “as increasing
numbers of cities and towns face fiscal distress.”321 High-profile examples of municipalities that
have filed bankruptcy under Chapter 9 include the City of Detroit, Michigan;322 the City of San
Bernardino, California;323 Jefferson County, Alabama;324 and the City of Fairfield, Alabama.325
Chapter 15 Ancillary and Cross-Border Cases
Congress enacted Chapter 15 of the Bankruptcy Code326 “as a means to facilitate international
cooperation in the administration of cross-border insolvencies”327 and to “incorporate the Model
Law on Cross-Border Insolvency . . . promulgated by the United States Commission on
International Trade Law.”328 Chapter 15 “authorizes an ‘ancillary’ proceeding in a United States
bankruptcy court that is largely designed to complement and assist a foreign insolvency
proceeding by, among other things, ‘bringing people and property beyond the foreign main
proceeding’s jurisdiction into the foreign main proceeding through the exercise of the United
States’ jurisdiction.”329
“Filings under Chapter 15” are “relatively infrequent.”330
Conversion to Another Chapter
Under certain circumstances, a bankruptcy court may convert a case commenced under one
Chapter of the Bankruptcy Code to a case under another Chapter.331 For example, if a Chapter 11
debtor engages in “gross mismanagement of the estate,”332 the bankruptcy court may convert the
case to a Chapter 7 liquidation and thereby place the debtor’s assets under the control of a
Chapter 7 trustee to “liquidate the property so as to maximize distribution to creditors of the
estate.”333 Similarly, “a chapter 13 debtor who is unable to complete plan payments may request
that the case be converted to Chapter 7.”334

Chapter 9 case only for the limited purpose of pursuing certain causes of action, and only “if the debtor refuses to
pursue” those causes of action).
321 Laura N. Coordes, Gatekeepers Gone Wrong: Reforming the Chapter 9 Eligibility Rules, 94 WASH. U. L. REV. 1191,
1195 (2017).
322 See Lyda v. City of Detroit, Mich. (In re City of Detroit, Mich.), 841 F.3d 684, 688 (6th Cir. 2016).
323 See City of San Bernardino, Cal., 499 B.R. 776, 778 (Bankr. C.D. Cal. 2013).
324 See In re Jefferson Cty., Ala., 469 B.R. 92, 97 (Bankr. N.D. Ala. 2012).
325 See In re City of Fairfield, Ala., Case No. 20-BK-1800 (Bankr. N.D. Ala. 2020), Docket No. 1 (Chapter 9
bankruptcy petition).
326 11 U.S.C. §§ 1501-1532.
327 O’Sullivan v. Loy (In re Loy), 432 B.R. 551, 554-55 (E.D. Va. 2010).
328 In re SPhinX, Ltd., 351 B.R. 103, 112 & n.11 (Bankr. S.D.N.Y. 2006) (quoting 11 U.S.C. § 1501(a)).
329 Jaffe v. Samsung Elecs. Co., 737 F.3d 14, 24-25 (4th Cir. 2013) (quoting In re ABC Learning Ctrs. Ltd., 728 F.3d
301, 307 (3d Cir. 2013)).
330 Andrew B. Dawson, The Problem of Local Methods in Cross-Border Insolvencies, 12 BERKELEY BUS. L.J. 45, 79
(2015).
331 11 U.S.C. §§ 706, 1112, 1208, 1307.
332 See id. § 1112(b)(4).
333 See In re Chao, No. 11-38131, 2011 WL 5855276, at *4, *6-7 (Bankr. S.D. Tex. Nov. 21, 2011).
334 Ahart, supra note 288, at 576. See also 11 U.S.C. § 1307(a) (“The debtor may convert a case under [Chapter 13] to a
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Discharge
As noted above, most types of bankruptcy cases ideally culminate in a “discharge” of many of
the debtor’s preexisting debts.335 Generally speaking, a discharge:
 “Voids any judgment . . . to the extent that such judgment is a determination of
the personal liability of the debtor with respect to” the discharged debt;336 and
 “Operates as an injunction against the commencement or continuation of” any
“action” or “act to collect or recover” the discharged debt.337
A creditor who “attempt[s] to collect on a debt that has been discharged in a bankruptcy
proceeding” may potentially be “punished by contempt of court.”338 A court’s contempt authority
for violation of a discharge order comes from Sections 105 and 524(a)(2) of the Bankruptcy
Code.339 A court may hold a creditor in civil contempt for violating a discharge order where there
is not a “fair ground of doubt” as to whether the creditor’s conduct might be lawful under the
discharge order.340
Exceptions and Limitations to Dischargeability
Although most debts that arise prior to the date on which the debtor filed the petition are typically
dischargeable in bankruptcy,341 “Congress has decided” that, in some circumstances, “public
policy considerations override the need to provide the debtor with a fresh start.”342 The
Bankruptcy Code accordingly specifies certain categories of debts that are presumptively or
categorically nondischargeable in bankruptcy.343 For instance:
 A debtor may not discharge a debt “for death or personal injury caused by the
debtor’s operation of a motor vehicle, vessel, or aircraft if such operation was
unlawful because the debtor was intoxicated from using alcohol, a drug, or
another substance.”344
 A debtor may not obtain a discharge from “any debt . . . for money, property,
services, or an extension, renewal, or refinancing of credit, to the extent obtained
by fraud.345

case under chapter 7 of this title at any time.”).
335 See, e.g., 11 U.S.C. §§ 524, 727, 1141(d), 1328.
336 Id. § 524(a)(1).
337 Id. § 524(a)(2)-(3). But see id. § 524(b) (specifying situations in which the discharge provision codified at 11 U.S.C.
§ 524(a)(3) does not apply).
338 Johnston v. Valley Credit Servs. (In re Johnston), Bankr. No. 05-6288, Adv. No. 06-180, 2007 WL 3166941, at *3
(Bankr. N.D. W. Va. Oct. 25, 2007).
339 See Taggart v. Lorenzen, 139 S. Ct. 1795, 1801 (2019).
340 Id. at 1804.
341 E.g., Grable v. IRS (In re Grable), 188 B.R. 595, 595 (Bankr. W.D. Mo. 1995) (“Most pre-petition debts are
dischargeable.”).
342 In re Chambers, 348 F.3d 650, 653 (7th Cir. 2003).
343 See generally, e.g., 11 U.S.C. §§ 523, 727(b), 1141(d)(2), 1328(a)(2) & (c)(2).
344 Id. § 523(a)(9).
345 Id., § 523(a)(2); see Lamar, Archer, & Cofrin, LLP v. Appling, 138 S. Ct. 1752, 1758 (2018) (“This exception is
keeping with the basic policy animating the Code of affording relief only to an honest but unfortunate debtor.” (internal
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 Nor may a debtor discharge “a domestic support obligation.”346
 A Chapter 7 debtor may not discharge a debt “for willful and malicious injury by
the debtor to another entity or to the property of another entity.”347
 A debtor may not discharge a student loan “unless excepting such debt from
discharge . . . would impose an undue hardship on the debtor and the debtor’s
dependents.”348
Also, as a general matter, a discharge order does not discharge claims against the debtor that arise
after the debtor filed a bankruptcy petition.349 Furthermore, with some exceptions, liens against
the debtor’s property generally “continue in effect despite the entry of a bankruptcy discharge,
which discharges only a debtor’s personal liability on an unpaid debt.”350
Additionally, under certain circumstances, a bankruptcy court may deny a discharge to a debtor
who might otherwise be eligible to receive one. For instance, a bankruptcy court may deny a
discharge to certain debtors who commit misconduct during the bankruptcy case or otherwise fail
to comply with certain requirements of the Bankruptcy Code.351 A debtor who files bankruptcy a
second time too soon after receiving a discharge in an earlier bankruptcy case may likewise be
ineligible for a discharge.352

quotation marks omitted)).
346 11 U.S.C. § 523(a)(5).
347 Id. § 523(a)(6). But see id. § 1328(a)(2) (providing that Section 523(a)(6) does not apply in Chapter 13 cases).
348 Id. § 523(a)(8). See generally CRS Report R45113, Bankruptcy and Student Loans, by Kevin M. Lewis.
349 E.g., Wood v. Wood (In re Wood), 825 F.2d 90, 94 (5th Cir. 1987) (“Generally, post-petition claims are not
dischargeable in bankruptcy.”); 11 U.S.C. § 727(b) (“A discharge . . . discharges the debtor from all debts that arose
before the date of the order for relief under this chapter.” (emphasis added)).
350 Guar. Co. of N. Am., USA v. Clark (In re Clark), Bankr. No. 09-27955-JS, Adv. No. 10-00063-JS, 2013 WL
5429866, at *3 (Bankr. D. Md. 2013) (interpreting 11 U.S.C. § 506(d)).
351 See generally, e.g., 11 U.S.C. §§ 727(a)(2)-(7), (11), 1328(g)(1). See also id. §§ 727(d)-(e), 1144(2), 1328(e)
(authorizing the revocation of a discharge previously granted by the bankruptcy court if the debtor has committed
misconduct).
352 See generally, e.g., id. §§ 727(a)(8)-(9), 1328(f).
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Appendix A. Glossary

Automatic Stay
A protection that the Bankruptcy Code provides the debtor against col ection
activities and many other actions by creditors.
Bankruptcy Code
A set of statutes codified at 11 U.S.C. §§ 101-1532 of the United States Code
that govern bankruptcy cases.
Bankruptcy Judge
A judicial officer established under Article I of the Constitution who rules on
issues in bankruptcy cases.
Case Trustee
The representative of the bankruptcy estate whose role and duties vary
depending on which Chapter of the Bankruptcy Code the debtor has invoked.
A case trustee appointed to administer a case under Chapter 7 of the
Bankruptcy Code is known as the “Chapter 7 trustee”; a case trustee
appointed under Chapter 13 is known as the “Chapter 13 trustee,” and so
forth. Not to be confused with the United States Trustee.
Collateral
Property that is pledged as security against a debt.
Confirmation
If a proposed plan satisfies the applicable provisions of the Bankruptcy Code,
the bankruptcy judge may “confirm” it. Confirmation causes the plan to
become effective and thereby bind interested parties.
Cramdown
Confirming a plan over the objection of certain creditors.
Creditor
One to whom the debtor owes money or who claims to be owed money by
the debtor.
Debtor
A person or entity that owes debts to creditors and has filed a petition for
relief under the Bankruptcy Code.
Discharge
Relief from some or all of a debtor’s debts. A discharge generally consists of a
legal right not to pay the discharged debts as well as safeguards against
harassment by the creditor whose debt is discharged.
Estate
With certain exceptions, the estate consists of the debtor’s property as of the
commencement of the case. The estate is created upon the filing of a
bankruptcy petition.
Exemption
Allows debtors to remove certain categories of assets from the property of
the estate and thereby insulate those assets from the claims of creditors.
Plan
A proposal to adjust the relationships between (1) the debtor; (2) the debtor’s
creditors; and (3) other stakeholders. A confirmed plan becomes a binding
contract between the debtor, its creditors, and other stakeholders, and
governs their respective rights and obligations.
Secured Creditor
A creditor who has a legal right against specific property that the debtor has
pledged as security against the debt in the event the debtor defaults. Compare
to Unsecured Creditor.
United States Trustee
An officer of the U.S. Department of Justice who oversees bankruptcy cases in
most jurisdictions. Not to be confused with the Case Trustee.
Unsecured Creditor
A creditor who takes no rights to any specific property of the debtor in
exchange for extending the debtor credit. Compare to secured creditor.
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Appendix B. Table Illustrating Differences Between
Chapters of the Bankruptcy Code353

Chapter 7
Chapter 9
Chapter 11
Chapter 12
Chapter 13
Who May File?
Certain
Certain
Certain
Certain family
Certain
individuals and
municipalities
individuals and
farmers and
individuals with
non-individuals
non-individuals
family fishermen regular income
with regular
income
End Goal
Liquidation of
Adjustment of
Usually,
Adjustment of
Adjustment of
the debtor
the debtor’s
reorganization
the debtor’s
the debtor’s
debts
of the debtor,
debts
debts
but occasionally
liquidation
Ideally Results in No
Yes
Yes
Yes
Yes
a Confirmed
Plan?
Case Trustee
Yes
Almost never,
Rarely
Yes—usually a
Yes—usually a
Appointed?
and only for
standing trustee
standing trustee
limited purposes
Debtor Typically No
Yes
Yes, unless
Yes
Yes
Retains Control
trustee
of its Assets and
appointed
Operations
During Case?

Author Information

Michael D. Contino

Legislative Attorney

Acknowledgments
Former Legislative Attorney Kevin Lewis was the original author of this report. Future inquiries from
congressional clients on this issue can be submitted to Michael Contino, who is listed as coordinator for
this product but is not the original author.

353 Because “a Chapter 15 case is” so “fundamentally different than one under other chapters of the Bankruptcy Code,”
Dawson, supra note 330, at 78, adding a column for Chapter 15 to this table would inhibit clarity. This table therefore
only illustrates the most pertinent differences between Chapters 7, 9, 11, 12, and 13.
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