Is it possible to convert a Chapter 12 bankruptcy to a Chapter 7 bankruptcy?

A debtor’s right to convert a Chapter 12 bankruptcy case to a Chapter 7 bankruptcy case (a “straight bankruptcy” or “liquidation” proceeding) is a “one-time only” right. Once the case has been converted to a Chapter 7 bankruptcy, the debtor may not convert back to a Chapter 12 case. The farmer-debtor or fisherman-debtor may convert a Chapter 12 case to a Chapter 7 case at any time. However, in some jurisdictions, the debtor must qualify under the means test to be a Chapter 7 debtor. (You and your bankruptcy attorney should check the governing law in your jurisdiction regarding the means test.) The conversion must be voluntary on the part of the farmer or fisherman. The court may not convert a Chapter 12 case to a Chapter 7 case for cause upon request of a party in interest. No provision allows a Chapter 12 debtor to convert to a Chapter 11 (business reorganization) case. On motion of a party in interest, and after notice and a hearing, the court may dismiss the case for cause, including:

  • Debtor’s unreasonable delay or mismanagement, which is prejudicial to creditors.
  • Debtor’s nonpayment of any fees or charges.
  • Debtor’s failure to file a timely plan.
  • Debtor’s failure to commence making timely payments according to the confirmed plan.
  • Denial of confirmation of a plan and denial of a request for additional time for filing another plan or modification of a plan.
  • Debtor’s default with respect to a term of the confirmed plan.
  • Revocation of the order of confirmation and denial of confirmation of a modified plan.
  • Termination of a confirmed plan by reason of the occurrence of a condition specified in the plan.
  • Continuing loss to or diminution to the estate.
  • Debtor’s failure to pay any domestic support obligation that is payable after the filing of the petition.

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