LAWDOG BANKRUPTCY: CHAPTER 12

Dismissal

Conversion

The debtor may convert a case under Chapter 12 to a case under Chapter 7 at any time. Any waiver of the right to convert under this subsection is unenforceable. Conversion may be elected where the debtor is unable to fulfill the requirements under a plan, or circumstances may arise where the completion of the plan is not feasible, and the debtor chooses to liquidate all nonexempt assets instead. See Section 1208 reproduced here for illustration purposes only.

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Discharge

Section 1228(a) provides for a discharge when the Chapter 12 debtor has fully performed under a plan. A Chapter 12 discharge relieves the debtor of all obligations provided for in the plan except for certain long-term debts, or nondischargeable debts under Section 523(a). These Section 523(a) "nondischargeable" debts may include certain taxes, money or property or services which were procured through fraud, spousal or child support, fines and penalties imposed by a governmental agency, certain student loans, willful and malicious injury, and others. Some claims under Section 523 are discharged unless the creditor takes timely action to object within very strict time deadlines. See Objections To Discharge from the previous menu or here. Link does not return to this page.

A "hardship discharge" may be granted under Section 1228(b) if a debtor has failed to complete payments under the plan. The failure to complete the plan payments must be due to circumstances for which the debtor should not justly be held accountable. Creditors must have also received as much, in present value dollars, as they would have received in a Chapter 7. This discharge is the same limited discharge that the debtor would have received in a Chapter 7. See Section 1228 reproduced here for illustration purposes only.

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Dismissal

On request of the debtor at any time, if the case has not been converted under section 706 or 1112 of this title, the court shall dismiss a case under this chapter. Any waiver of the right to dismiss under this subsection is unenforceable. A Chapter 12 may be dismissed either voluntarily by the debtor, or involuntarily by the Court for failure to comply with the requirements set forth in Bankruptcy Code Section 1208.

On request of a party in interest, and after notice and a hearing, the court may dismiss a case under Chapter 12 for cause, including unreasonable delay, or gross mismanagement, by the debtor that is prejudicial to creditors, failure to file a plan timely under section 1221, failure to commence making timely payments required by a confirmed plan, material default by the debtor with respect to a term of a confirmed plan, or continuing loss to or diminution of the estate and absence of a reasonable likelihood of rehabilitation, and others listed in Section 1208 (c).

On request of a party in interest, and after notice and a hearing, the court may dismiss a case under this chapter or convert a case under this chapter to a case under chapter 7 of this title upon a showing that the debtor has committed fraud in connection with the case. See Section 1208 reproduced here for illustration purposes only.

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