How to Convert an Individual Chapter 11 to a Chapter 7
Converting a Chapter 11 bankruptcy to a Chapter 7 filing may be a debtor's only alternative if his reorganization plan is not approved or if there are other circumstances that require conversion. If you've filed Chapter 11, you have a one-time right to convert to Chapter 7, barring certain qualifications. The following details how to convert your individual Chapter 11 bankruptcy to a Chapter 7 filing.
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Things You'll Need
- A list of all assets and liabilities
- A list of expenses and income
- Statement of financial affairs
- All other records related to the initial Chapter 11 filing
Instructions
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Determine if you meet the eligibility requirements for conversion. Under the bankruptcy code, a debtor has a one-time right to convert their filing unless they are not a debtor-in-possession, meaning they are not in possession of the property in which creditors have an interest. Conversion may only occur for cause if the Chapter 11 filing was involuntary or if there was a previous conversion to Chapter 11 that was not at the request of the debtor.
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Determine if you pass the means test. Under Chapter 7, there is a specific means test that must be met regarding the income limits for the individual debtor. This is determined by comparing median income to the average of the debtor's six prior months of income. Median income varies by state and can be found through the U.S. Census Bureau. If current monthly income is higher than the median, then you will need to show specific cause as to why the conversion should occur.
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If the means test is met, you must file a notice of conversion with the court. This essentially continues your current case. However, you may be appointed a new trustee and if so, you will need to resubmit your statement of assets and liabilities, as well as income and expenses. The notice of conversion is sent to your creditors, who then have the opportunity to contest the conversion. Depending upon the type of debt, creditors may or may not have to present proof of their claims.
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Identify which, if any, debts you wish to reaffirm as part of your bankruptcy filing. These are debts that you will continue to repay once your other debts have been discharged and these must be identified as such prior to completion of your case.
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If your creditors do not dispute the conversion, then your filing will proceed under the rules for Chapter 7. You must attend a meeting of your creditors, wherein you will be asked specific questions by the trustee and/or your creditors regarding your individual financial situation. The trustee will also take control of any assets you possess and liquidate them, distributing the proceeds, if any, among your creditors. If there are no objections raised at your meeting of creditors, then your bankruptcy will be discharged within ninety days and you will be released from liability to your debts.
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Tips & Warnings
Be aware of any changes to the time frame for filing motions that may occur with a conversion. These deadlines vary from state to state.
Consult a bankruptcy attorney beforehand to determine if conversion is both feasible and beneficial for your particular circumstances.
