Share

Affiliated Attorneys, LLC Blog

Tuesday, June 19, 2018

What is the difference between a reorganization and a liquidation?

When a person declares bankruptcy, it must be clear whether the petition asks the bankruptcy court to discharge the debts listed therein or asks to reorganize the debt. An individual files for reorganization under Chapter 13 of the bankruptcy code, while a business uses Chapter 11. Both businesses and individuals may file for a discharge under Chapter 7 of the bankruptcy code.

In liquidation, a bankruptcy trustee collects the assets of a debtor, sells them to make them liquid, and distributes the money among the creditors to pay off as many of the debts as possible. Once this is done, the debts owed are discharged, which means they are permanently canceled. Creditors usually receive much less than they are owed, if they receive anything at all. If an individual asks the bankruptcy court for a discharge, the consequences are limited to the individual’s credit. He or she will likely continue living his or her life normally afterwards, though the assets she or he retains afterwards are limited to those exempt from the bankruptcy. A business, on the other hand, must be dissolved after discharges are granted. It must close its doors, fire all of its employees, terminate pension plans, and cease operations. If a company is large enough, a bankruptcy trustee might sell an entire division to help appease creditors.

A  reorganization is completely different. An individual in reorganization must consolidate his or her debts and work with the bankruptcy trustee to establish a budget to repay creditors over time under more favorable terms. An individual can keep assets that would otherwise be sold and businesses can continue operating normally. In order to qualify, a bankruptcy petitioner must make enough money to pay the debts under a reasonable repayment plan. Even though creditors will receive more money under a reorganization than under a discharge, it will take longer for them to receive any money, and some debts will be cancelled in whole or in part.

Only an attorney is qualified to assess the factors in each person’s unique case can provide advice on whether a liquidation or reorganization is better equipped to resolve that person’s situation.


Archived Posts

2018
November
October
September
August
July
June
May
April
March
February
January
2017
2016
December
November
October
September
August
July
June
May
April
March
February
January
2015
December
November
October
September
August
July
June
May
April
March
February
January
2014
December
November
October
September
August
July
June
May
April
March
February
January
2013
2012


Serving Southeastern Wisconsin, with offices in Milwaukee and West Bend, Affliated Attorneys, LLC represent clients throughout Milwaukee County, Washington County, Waukesha County, Dodge County, Ozaukee County, Racine County, Sheboygan County, Jefferson County, Fond du Lac County and Walworth County.



© 2018 Affiliated Attorneys LLC | Disclaimer
1126 South 70th Street, Suite N405, Milwaukee, WI 53214
| Phone: 414-277-9088
530 Walnut Street, Suite 1, West Bend, WI 53095
| Phone: 262-306-9222
501 N 8th Street, Suite 118, Sheboygan, WI 53081
| Phone: 920-395-6094

Personal Bankruptcy | Family Law | Divorce | Estate Planning | Pet Trusts | Deportation Defense | Permanent Residency | U.S. Citizenship | Probate & Estate Administration | Guardianships | Elder Law / Medicaid Planning | Residential Real Estate

Attorney Website Design by
Zola Creative