Chapter 7 Bankruptcy
For a business, Chapter 7 provides for the liquidation of all valuable company assets by a court appointed Trustee. The Trustee distributes the proceeds of the liquidation to creditors. Certain claims (such as certain taxes) are designated by the bankruptcy code as “priority” claims, and are paid first.
Chapter 11 Bankruptcy
A Chapter 11 bankruptcy provides businesses with the opportunity to restructure their relationships with their creditors in a manner that allows them to continue successful business operations. In Chapter 11, the debtor usually remains in possession of his assets and continues to operate any business, subject to the oversight of the court. The debtor proposes a plan of reorganization which and this plan is then voted upon by the creditors. Acceptance of the plan by the court binds both the debtor and the creditors to its terms of repayment.