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For creditors who hold a large amount of disposable income, there is always a risk when they give money to individual debtors, that the debtor will pursue a chapter 7 bankruptcy to avoid the payment.
1) A creditor can convert a chapter 7 bankruptcy case to a Chapter 11 bankruptcy case by filing a motion
The creditors have a power under section 706(b) that allows them to convert any case into chapter 11 whether the debtor’s debts are of consumer or business nature. U der section 707 of the code, if a Debtor’s debts are of a business nature, conversion may not be an option.
2) If a case can be converted or not, is at the complete discretion of the bankruptcy court.
The discretion to convert from chapter 7 to Chapter 11 lies in the hands of the bankruptcy court, as they need to decide whether the conversion will be benefited all the parties in interest. The court should consider all points including the ability of the debtor to make the payment, as there are no specific grounds for a conversion. A Debtor’s ability to pay or not is given a lot of importance under section 706(b).
3) Benefits of Filing a Conversion Motion
The most important and obvious benefit of conversion into a Chapter 11 is getting the creditor money. The debtor’s incomes including post pension income are all now dedicated to planning payments of the creditors. Over 5 years, the amount that a creditor receives from the debtor is enough to get the fees and expenses incurred in getting a conversion. It is even more. But before going forward with a conversion, a creditor should consult an attorney and make sure that going forward with the process is viable for them. A creditor needs the consultation of a good attorney who can help them with the process and who is well worst with helping the creditors in bankrupt c cases. You can also contact Recovery Law Group from Los Angeles & Dallas, TX for the Same. Contact – (888-297-6203).
Bankruptcy mostly is for the benefit of the debtors, so that they don’t have to pay off their complete debts. However, certain clauses do benefit the creditors as well.