Conversion of an Individual Chapter 11 to a Chapter 7 Bankruptcy

Macon Georgia Bankruptcy Lawyer | Bankruptcy Attorney Macon GA

Many a time, we start filing for bankruptcy under one chapter but later on shift to another chapter. This is known as conversion in bankruptcy process. Let us consider conversion of chapter 11 (individual) to chapter 7. This is mainly done under circumstances where debtor’s reorganization plan is not accepted. All debtors who file for bankruptcy under chapter 11 have a right to convert once to chapter 7 under Bankruptcy Law.

Filing for Conversion

There are certain requirements prior to filing for conversion. You would need a list of all your assets and liabilities, a list of income and expenses, statement of financial affairs and all records of the initial chapter 11 filing. Debtors retain one time right to convert filing if they are debtor in possession. Conversion can occur only if chapter 11 bankruptcy filing was involuntary or the previous conversion to chapter 11 was not according to wishes of debtor.

To be eligible to convert to chapter 7, you need to pass the means test which would identify your eligibility for bankruptcy under chapter 7. This means test checks the income limits of individual debtor. The income limit is calculated by comparing median income to average if six month’s income of debtor. Median income is different in different states and can be obtained from the US Census Bureau. In the event of debtor’s income being higher than median, debtor would have to provide valid reasons as to why the conversion should be facilitated. Very good legal representation would be required and it is better to hire services of a competent and reputed bankruptcy attorney.

Once you qualify through means test, a notice of conversion has to be filed in court. This would ensure that your current case continues. There is probability that a new trustee may be appointed and therefore you might have to resubmit all statement of liabilities and assets, income and expenses.

Creditors are sent the notice of conversion and if they wish can contest it. They would need to prove their claims while contesting conversion and this is largely dependent on type of debt.

Identify the debts that you wish to reaffirm as part of bankruptcy filing and you can repay them once your other debts are discharged through bankruptcy. These debts must be identified and indicated to court prior to completion of bankruptcy court. 

If there are no disputes from creditors, bankruptcy proceeds under chapter 7 rules. Debtor has to attend creditor’s meeting and answer questions asked by trustee and creditors with respect to financial situation. Debtor’s assets would be possessed and liquidated by the trustee and money recovered used to pay of creditors. Bankruptcy will be discharged within ninety days if there are no objections raised by creditors.

Call a Macon bankruptcy lawyer if you are considering bankruptcy.