Bankruptcy Alphabet-C is for Conversion

I could have gone with more popular C words like “Confirmation”, “Chapter” or “Creditor”, but I thought the other bankruptcy attorneys following this alphabet game would strike at those and I want to try and find the non-obvious or unpopular terms.

C is for Conversion.

Photo by Poppy Thomas-Hill

Bankruptcy cases can be converted from one chapter to another for several reasons.

In Chapter 7 Bankruptcy, the debtor almost has an absolute right to convert his case to any other chapter of the Bankruptcy Code as long as the debtor is eligible and meets the requirements for the proposed converting chapter. 11 U.S.C. §706.

Why would a debtor want to convert their case from Chapter 7 to a different chapter? There is a variety of reasons:


Chapter 11 reorganization cases can be converted to chapter 7 pursuant to 11 U.S.C. §1112(a). A business could do this if they are the debtor in possession and they intend to liquidate the business. Cases can be converted to Chapter 12 or Chapter 13 if requested by the Debtor and the Debtor has not received a discharge of debt. 11 U.S.C. §1112(d).
Family Farmers in a Chapter 12 casehave an absolute right to convert their case to Chapter 7 “at any time”. 11 U.S.C. §1208(a). A broad reading of 11 U.S.C. §1208(e) may allow for the conversion of a Chapter 12 case to any other chapter of bankruptcy as long as the debtors meet the eligibility requirements for that chapter.

Finally, Chapter 13 debtors have an absolute right to convert their case to Chapter 7 “at any time”. 11 U.S.C. §1307(a). Chapter 13 cases can be converted to Chapter 11 or Chapter 12 if the debtors meet the eligibility requirements for that chapter and a Chapter 13 bankruptcy plan has not yet been confirmed. 11 U.S.C. §1307(d).

Why would a Chapter 12 or Chapter 13 debtor want to convert to Chapter 7?

  • Circumstances may have changed that no longer make it possible for the debtor to commit to a plan.
  • Debtor no longer wants to protect certain property from liquidation.
  • Debtor may have satisfied paying secured creditors under the plan and decide to discharge the remainder of debt under Chapter 7.

Conversion of cases happens a lot. Bankruptcy cases always seem to be in flux and it requires a qualified bankruptcy attorney to analyze and advise the best course of action.

-Ryan D. Caldwell is a Omaha and Lincoln, Nebraska Bankruptcy Attorney and strives to provide clients with compassionate legal care in areas of bankruptcy, family law, creditor’s rights, estate planning, and probate.

Other Bankruptcy Lawyers talking about the Letter C are as follows:

 

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