Each case can file any of these types of bankruptcy, however, a specific chapter may be better suited for each individual case.
Chapter 11 is mainly bankruptcy for business and its purpose is to reorganize the debt of the business. Reorganization divides the credit accounts into different classes and assets are then liquefied and distributed. The debtor can devise a plan of reorganization for the approval of the court within a 120-day deadline or the debtor can request a court appointed trustee to plan the reorganization. This chapter of bankruptcy allows the business to continue to operate during the bankruptcy under the supervision of Bankruptcy Court. Chapter 11 allows for liquidation of the business assets that are not immediately needed for the operation of the business and a plan for payment of the assets needed for the operation of the business. This will allow the sole proprietor in this case to stay in business and she can change her business to a more suitable and profitable business under the supervision of the court while at the same time eliminating the majority of her debt.
In this case, the debtor should file chapter 7 bankruptcy. The debtor is assigned a trustee who liquidates assets and then divides the proceeds fairly among the creditors.