What is a “conversion to Chapter 7” in a Chapter 11 bankruptcy?

A conversion to Chapter 7 in a Chapter 11 bankruptcy is a process when a Chapter 11 bankruptcy case is changed to a Chapter 7 bankruptcy case. When this happens, the bankruptcy trustee appointed to the case will then sell off or liquidate the debtor’s assets in order to pay off creditors. Chapter 11 bankruptcies allow businesses or individuals to reorganize their finances so that they can pay off their debts. This is done by creating a repayment plan over a set amount of time. However, if the debtor does not follow their repayment plan or cannot repay their creditors, the case can be converted to a Chapter 7 bankruptcy. In a conversion to Chapter 7, the debtor loses their right to propose a repayment plan. The debtor’s property is liquidated or sold off to pay off creditors. This may include property that is not covered by the debtor’s exemption limit. In Mississippi, a debtor’s attorney must file a motion to convert the case and a hearing will be held. If the judge grants the motion, the conversion to Chapter 7 will take effect. The debtor must then work with the assigned bankruptcy trustee to liquidate their assets and pay off their creditors.

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What is a “conversion to Chapter 7” in a Chapter 11 bankruptcy?

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