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This chapter examines the crucial concepts of conversion and dismissal within bankruptcy proceedings. You will learn how a Chapter 7 bankruptcy can be converted into a Chapter 11 (or vice versa), often following a failed reorganization effort. The chapter also clarifies the important distinction between a "discharge," which eliminates personal liability, and a "dismissal," which reverts the debtor to their prepetition state, reinstating all prior debts. Additionally, the procedures for both conversion and dismissal are detailed, outlining their effects on the debtor's financial affairs.
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Chapter Eight.Conversion and Dismissal • After reading this chapter, you will be able to: • Define the concept of conversion • Describe how a bankruptcy proceeding may be dismissed • Describe the procedure to convert or dismiss a proceeding and to define the effect of the conversion or dismissal of a Bankruptcy proceeding upon the debtor’s financial affairs.
Conversion • Conversion means that a Chapter 7 is changed to a Chapter 11 or vice versa. • Commonly, a Chapter 13 or Chapter 11 reorganization that has failed is converted to a Chapter 7 liquidation.
Practice Pointer • It is important to understand the distinction between a ‘‘discharge,’’ which relieves the debtor of his/her personal liability and a ‘‘dismissal,’’ which returns the debtor back in his/her prepetition position and reinstates all of his/her prepetition debts and obligations.
Dismissal • A dismissal will terminate a bankruptcy proceeding and render the proceeding ineffective.
