Although the method for managing debts in a personal Chapter 7 case versus a business Chapter 7 are similar, the outcomes can be quite different. This generally has to do with the assets that are involved and whether they are protected by bankruptcy laws.
In a personal Chapter 7 bankruptcy, an individual files for debt elimination through the court. In most cases, the court will review the debts owed to creditors and resolve these debts in one of two ways. The court may require that the creditor simply write off the debt and absolve the individual of the debt liability. The court may also determine that creditors are entitled to profits from the sale of, or access to, some of the debtors assets.
In the latter case, debtors may lose some of their assets to liquidation for the purposes of satisfying their debts. However, a personal Chapter 7 bankruptcy does have the benefit of protecting certain assets by way of bankruptcy exemption laws. These laws afford an individual to exempt certain property from liquidation by creditors.
There are no bankruptcy exemption laws that offer protection in business Chapter 7 cases. Therefore, businesses that enter Chapter 7 can be certain that their assets will be liquidated and dissolved for purposes of repaying creditors a portion of what is owed.