In general terms, Chapter 7 is a discharge of debts. In most Ch. 7 cases, debts exceed assets. However, there still may be assets. The bankruptcy trustee liquidates the assets, and distributes the proceeds to creditors according to a system of priority and amount. Secured debt normally come first, according to the assets that secured them. Normally, unsecured creditors with relatively small balances owed to them end up with little or nothing. In most cases, the company ceases operation immediately or shortly upon filing, although large companies may sell off divisions which continue separately, or under another owner.

Chapter 11 is a reorganization, where the trustee works with creditors to allow for the company to exist as a going concern. Loans may be restructured, and some debts and payables may be reduced or eliminated. Senior creditors usually need to agree to this process, and work cooperatively within it. The company continues to operate, with the intention of emerging from the process as a viable profitable entity. The advantage to creditors is that if the company does survive, they may get more than if the company was simply liquidated in a 7.

In either case, the trustee works to ensure that the assets produce maximum value or return, and that creditors are amortized in the correct order under the law.