Steward files Chapter 11 bankruptcy. How is it different from Chapter 7 or Chapter 13
BROCKTON — In light of Steward Health Care declaring bankruptcy under Chapter 11, you may be wondering what that means and how it differs from other ways of going bankrupt.
Simply put, Chapter 11 is named for the section of the U.S. bankruptcy code that allows a company to seek protection from creditors while it keeps operating. This way, the company can continue to generate revenue to pay off debts. It's known as a reorganization bankruptcy. Individuals may also file for bankruptcy under Chapter 11, but that is not common.
Although any bankruptcy is a kind of financial death, companies may emerge from Chapter 11 financially stable. One local company that recently succeeded in exiting Chapter 11 bankruptcy is Clover Food Lab. The chain of vegetarian restaurants came out of bankruptcy in April and has a 5-year plan to open 47 new eateries around New England.
MORE: What to know about Steward Health Care amid bankruptcy, financial crisis
What is Chapter 7 bankruptcy?
In Chapter 7 bankruptcies, by contrast, a company or individual's assets are sold off or liquidated. The proceeds go to creditors. This way of going bankrupt is more commonly used by individuals and smaller companies.
What is Chapter 13 bankruptcy?
Persons filing for bankruptcy may opt for Chapter 13 instead. It's for people who have ongoing income. They work out a plan with a bankruptcy court to pay back a percentage of their debts. This chapter is not for companies, although individuals may use this method if their business is set up as a sole proprietorship.
WHO IS STEWARD? What to know about Steward Health Care amid bankruptcy, financial crisis
Steward's bankruptcy filing
Steward's bankruptcy will be complex, given the for-profit healthcare company's structure and nationwide reach. In its initial filing, the company indicated it has more than 100,000 creditors. U.S. Bankruptcy Judge Christopher Lopez of Texas agreed Monday to grant "complex case designation" to Steward's bankruptcy.
If Steward owes you money, or you want to keep up-to-date with legal filings in the case, the financial risk and advisory firm Kroll has a dedicated webpage for the Steward bankruptcy.
Send your news tips to reporter Chris Helms by email at CHelms@enterprisenews.com or connect on X at @HelmsNews.
This article originally appeared on The Enterprise: Steward Health Care files Chapter 11 bankruptcy. Why not Chapter 7?
