Abstract

This paper discusses some of the consequences of converting a bankruptcy case from one chapter to another. At present, there are four different forms of bankruptcy: chapter 7, chapter 9, chapter 11, chapter 13. Congress is currently considering creating yet a fifth form of bankruptcy for farmers. Most individual debtors are now eligible for relief under three of the chapters, 7, 11, or 13. Corporate and partnership debtors can now choose between chapter 7 and chapter 11. The various chapters of the Bankruptcy Code differ in both policy and particulars. A chapter 7 case involves liquidation of the "property of the estate" -usually as promptly as practicable. In the typical chapter 11 case or chapter 13 case, the debtor's "property of the estate" is not liquidated. Rather, the debtor retains his, her or its property. Creditors are paid pursuant to a court-approved plan out of future earnings. Bankruptcy concepts such as "property of the estate" are common to chapters 7, 11, and 13. Chapter 1 of the Bankruptcy Code, General Provisions, chapter 3 of the Bankruptcy Code, Case Administration, and chapter 5 of the Bankruptcy Code, Creditors, the Debtor and the Estate, generally apply to all bankruptcy cases. The application of these basic bankruptcy concepts, however, varies from chapter to chapter. For example, the term "property of the estate" has a different meaning in a chapter 13 case from a chapter 7 or 11 case. If a debtor is dissatisfied with his initial choice of a chapter, he can change his mind and choose another chapter. Section 706 governs conversion from chapter 7; section 1112 deals with conversion from chapter 11; section 1307 controls conversion from chapter 13. A motion to convert can be filed by either the debtor or by a "party in interest." Generally, motions to convert are filed by debtors who after trying to effect a rehabilitation under chapter 11 or chapter 13 now want to liquidate under chapter 7.

Document Type

Article

Publication Date

1986

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