Not every Chapter 11 case ends with completion of the Chapter 11 plan. Sometimes, cases are converted to a different chapter of the bankruptcy code. This can happen for a variety of reasons, but most often the issue hinges on what is in the best interests of the debtor. Sometimes the circumstances that existed at the initial filing or at confirmation no longer exist. In these situations, dismissal of the case or conversion to another chapter can be an appropriate remedy.
As a matter of right, a Chapter 11 debtor can convert his or her case to a case under Chapter 7 in many situations. For other situations, court permission must be sought. Court permission would be needed if: (1) The debtor is not a debtor in possession; (2) The case was originally an involuntary Chapter 11 case (this is rare); (3) The case was previously converted to Chapter 11 from another chapter at the debtor’s request.
As a case progresses, sometimes it becomes clear that conversion to another chapter of the bankruptcy code will be necessary. If a feasible plan can’t be proposed or implemented, administrative costs are not paid, the confirmation order is revoked, the plan is in default, or some other unforseen circumstances intervenes, it is good to know that conversion is an option. In some situations, a dismissal of a case followed by a refiling under another chapter is also an appropriate remedy. Everything depends on the circumstances.