Why do chapter 7 bankruptcies out number chapter 11?

Answer 1

Like anything...the #s themselves may not really tell the whole story. I would suggest that in Business, especially larger ones, Chapter 11 far outnumbers the Chapter 7. In fact, trying to avoid the Chap. 7, which generally means a complete dissolution of the enterprise, many companys have first tried Chap. 11, several times. Chapt. 07 in a small or personal situation is the one that eliminates debts for sure. In filing it, one agrees there is really no hope of working out the problems, making changes in habits, etc., that are realistic and would eventually satisfy the debtors, even if some agree to receive substantially less than they would. While Chap. 11 process may also bring relief to the debtor for some portion of debts, or at least modify how they have to be paid, and holds the wolf at bay (if you will), while it operates, it really doesn't offer the fresh start that many (probably foolishly) feel Chap 07 does. And realistically, many people who are contemplating these actions really don't have a whole lot they want to try and save that the Laws don't protect in the Chap 7 process. Getting rid of the debt may well be just easier than making a budget and sacraficing a bit to pay off those they borrowed from, and have self respect, and maybe even credit, for the future. Of course, frequently the lack of forsight and self respect are the same foolish ideas that made them get in way over their heads anyway.