Converting From Chapter 7 To Chapter 11 Bankruptcy
Author: NV Firm
Bankruptcy
When you file for a Chapter 7 Bankruptcy, you’re essentially placing your debts and property in the hands of a court-appointed ‘trustee.’ This trustee will look over your debts and your assets, and determine whether any property you own, such as non-exempt properties and collateral properties like a house or car, can be sold for money to distribute to your creditors. After this process, your debts are wiped out by the court, excluding any automatically surviving debt such as child support, student loans, and any debt that was incurred through your own malicious action. You are not eligible to file a Chapter 7 Bankruptcy if you could possibly make payments under a Chapter 13 plan or if you have received another bankruptcy discharge within the past six to eight years.
While a Chapter 7 Bankruptcy is a liquidation plan, a Chapter 11 Bankruptcy is a reorganization plan. When a debtor files for a Chapter 11 Bankruptcy, they are entering into an agreement with their creditors to alter the terms of their debts. Under a Chapter 11 Plan, a debtor acts as their own representative and does not rely on the court to make decisions for them, thus allowing them to negotiate with creditors on their own behalf, which may result in a more favorable agreement. An individual is able to file under Chapter 11 if they have too much income or too much debt to qualify under Chapters 7 or 13.
In order to convert from a Chapter 7 to a Chapter 11 Bankruptcy, a debtor must show that they meet the financial requirements for Chapter 11 and that their present Chapter 7 Bankruptcy Plan was an initial filing and was not converted from any other case. A debtor converting to Chapter 11 must also show the bankruptcy court that the conversion is not done in bad faith. If you meet those requirements, then you can petition the court for a conversion of your bankruptcy plan. After that, a notice of conversion is sent to your creditors, who may or may not challenge the case. If the conversion is not successfully challenged, then your bankruptcy plan will proceed under the rules and laws of the chapter to which it has been converted.
