Understanding Bankruptcy: Conversion and Dismissal Procedures
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.
Understanding Bankruptcy: Conversion and Dismissal Procedures
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Presentation Transcript
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.
