11 U.S.C. § 1112
HISTORICAL AND REVISION NOTES
LEGISLATIVE STATEMENTSSection 1112 of the House amendment represents a compromise between the House bill and Senate amendment with respect to the factors constituting cause for conversion of a case to chapter 7 or dismissal. The House amendment combines two separate factors contained in section 1112(b)(1) and section 1112(b)(2) of the Senate amendment. Section 1112(b)(1) of the House amendment permits the court to convert a case to a case under chapter 7 or to dismiss the case if there is both a continuing loss to or diminution of the estate and the absence of a reasonable likelihood of rehabilitation; requiring both factors to be present simultaneously represents a compromise from the House bill which eliminated both factors from the list of causes enumerated.Sections 1112(c) and 1112(d) of the House amendment is derived from the House bill which differs from the Senate amendment only as a matter of style.
SENATE REPORT NO. 95-989This section brings together all of the conversion and dismissal rules for chapter 11 cases. Subsection (a) gives the debtor an absolute right to convert a voluntarily commenced chapter 11 case in which the debtor remains in possession to a liquidation case.Subsection (b) gives wide discretion to the court to make an appropriate disposition of the case sua sponte or upon motion of a party in interest, or the court is permitted to convert a reorganization case to a liquidation case or to dismiss the case, whichever is in the best interest of creditors and the estate, but only for cause. Cause may include the continuing loss to or dimunition [sic] of the estate of an insolvent debtor, the absence of a reasonable likelihood of rehabilitation, the inability to effectuate a plan, unreasonable delay by the debtor that is prejudicial to creditors, failure to file a plan within the appropriate time limits, denial of confirmation and any opportunity to modify or propose a new plan, revocation of confirmation and denial of confirmation of a modified plan, inability to effectuate substantial consummation of a confirmed plan, material default by the debtor under the plan, and termination of the plan by reason of the occurrence of a condition specified in the plan. This list is not exhaustive. The court will be able to consider other factors as they arise, and to use its equitable powers to reach an appropriate result in individual cases. The power of the court to act sua sponte should be used sparingly and only in emergency situations.Subsection (c) prohibits the court from converting a case concerning a farmer or an eleemosynary institution to a liquidation case unless the debtor consents.Subsection (d) prohibits conversion of a reorganization case to a chapter 13 case unless the debtor requests conversion and his discharge has not been granted or has been revoked.Subsection (e) reinforces section 109 by prohibiting conversion of a chapter 11 case to a case under another chapter proceedings under which the debtor is not permitted to proceed.
REFERENCES IN TEXTThe Federal Rules of Bankruptcy Procedure, referred to in subsec. (b)(4)(G), are set out in the Appendix to this title.
AMENDMENTS2010-Subsec. (b)(1). Pub. L. 111-327, §2(a)(33)(A)(i), amended par. (1) generally. Prior to amendment, par. (1) read as follows: "Except as provided in paragraph (2) of this subsection, subsection (c) of this section, and section 1104(a)(3), on request of a party in interest, and after notice and a hearing, absent unusual circumstances specifically identified by the court that establish that the requested conversion or dismissal is not in the best interests of creditors and the estate, the court shall convert a case under this chapter to a case under chapter 7 or dismiss a case under this chapter, whichever is in the best interests of creditors and the estate, if the movant establishes cause."Subsec. (b)(2). Pub. L. 111-327, §2(a)(33)(A)(ii)(I), inserted introductory provisions and struck out former introductory provisions which read as follows: "The relief provided in paragraph (1) shall not be granted absent unusual circumstances specifically identified by the court that establish that such relief is not in the best interests of creditors and the estate, if the debtor or another party in interest objects and establishes that-".Subsec. (b)(2)(B). Pub. L. 111-327, §2(a)(33)(A)(ii)(II), substituted "converting or dismissing the case" for "granting such relief".Subsec. (e). Pub. L. 111-327, §2(a)(33)(B), substituted "521(a)" for "521".2005-Subsec. (b). Pub. L. 109-8 added subsec. (b) and struck out former subsec. (b) which consisted of introductory provisions and pars. (1) to (10) relating to conversion of cases under this chapter to chapter 7 cases or dismissal for cause in the best interest of creditors and the estate.1994-Subsec. (b). Pub. L. 103-394 inserted "or bankruptcy administrator" after "United States trustee".1986-Subsec. (b). Pub. L. 99-554, §224(1)(A), inserted "or the United States trustee" after "party in interest".Subsec. (b)(10). Pub. L. 99-554, §224(1)(B)-(D), added par. (10).Subsec. (d). Pub. L. 99-554, §256, inserted reference to chapter 12 and added par. (3).Subsecs. (e), (f). Pub. L. 99-554, §224(2), (3), added subsec. (e) and redesignated former subsec. (e) as (f).1984-Subsec. (a)(2). Pub. L. 98-353, §505(a)(1), substituted "originally was commenced as an involuntary case" for "is an involuntary case originally commenced".Subsec. (a)(3). Pub. L. 98-353, §505(a)(2), substituted "other than on" for "on other than".Subsec. (b)(5). Pub. L. 98-353, §505(b)(1), inserted "a request made for" before "additional".Subsec. (b)(8). Pub. L. 98-353, §505(b)(2), substituted "or" for "and".
EFFECTIVE DATE OF 2005 AMENDMENTAmendment by Pub. L. 109-8 effective 180 days after Apr. 20, 2005, and not applicable with respect to cases commenced under this title before such effective date, except as otherwise provided, see section 1501 of Pub. L. 109-8 set out as a note under sectionof this title.
EFFECTIVE DATE OF 1994 AMENDMENTAmendment by Pub. L. 103-394 effective Oct. 22, 1994, and not applicable with respect to cases commenced under this title before Oct. 22, 1994, see section 702 of Pub. L. 103-394 set out as a note under sectionof this title.
EFFECTIVE DATE OF 1986 AMENDMENTEffective date and applicability of amendment by section 224 of Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554 set out as a note under sectionof Title 28, Judiciary and Judicial Procedure.Amendment by section 256 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554.
EFFECTIVE DATE OF 1984 AMENDMENTAmendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353 set out as a note under sectionof this title.
- The term "debtor" means person or municipality concerning which a case under this title has been commenced.(13A) The term "debtor's principal residence"-(A) means a residential structure if used as the principal residence by the debtor, including incidental property, without regard to whether that structure is attached to real property; and(B) includes an individual condominium or cooperative unit, a mobile or manufactured home, or trailer if used as the principal residence by the debtor.
- domestic support obligation
- The term "domestic support obligation" means a debt that accrues before, on, or after the date of the order for relief in a case under this title, including interest that accrues on that debt as provided under applicable nonbankruptcy law notwithstanding any other provision of this title, that is-(A) owed to or recoverable by-(i) a spouse, former spouse, or child of the debtor or such child's parent, legal guardian, or responsible relative; or(ii) a governmental unit;(B) in the nature of alimony, maintenance, or support (including assistance provided by a governmental unit) of such spouse, former spouse, or child of the debtor or such child's parent, without regard to whether such debt is expressly so designated;(C) established or subject to establishment before, on, or after the date of the order for relief in a case under this title, by reason of applicable provisions of-(i) a separation agreement, divorce decree, or property settlement agreement;(ii) an order of a court of record; or(iii) a determination made in accordance with applicable nonbankruptcy law by a governmental unit; and(D) not assigned to a nongovernmental entity, unless that obligation is assigned voluntarily by the spouse, former spouse, child of the debtor, or such child's parent, legal guardian, or responsible relative for the purpose of collecting the debt.
- The term "insolvent" means-(A) with reference to an entity other than a partnership and a municipality, financial condition such that the sum of such entity's debts is greater than all of such entity's property, at a fair valuation, exclusive of-(i) property transferred, concealed, or removed with intent to hinder, delay, or defraud such entity's creditors; and(ii) property that may be exempted from property of the estate under section 522 of this title;(B) with reference to a partnership, financial condition such that the sum of such partnership's debts is greater than the aggregate of, at a fair valuation-(i) all of such partnership's property, exclusive of property of the kind specified in subparagraph (A)(i) of this paragraph; and(ii) the sum of the excess of the value of each general partner's nonpartnership property, exclusive of property of the kind specified in subparagraph (A) of this paragraph, over such partner's nonpartnership debts; and(C) with reference to a municipality, financial condition such that the municipality is-(i) generally not paying its debts as they become due unless such debts are the subject of a bona fide dispute; or(ii) unable to pay its debts as they become due.
- The term "petition" means petition filed under section 301, 302, 303 and 3 1504 of this title, as the case may be, commencing a case under this title.(42A) The term "production payment" means a term overriding royalty satisfiable in cash or in kind-(A) contingent on the production of a liquid or gaseous hydrocarbon from particular real property; and(B) from a specified volume, or a specified value, from the liquid or gaseous hydrocarbon produced from such property, and determined without regard to production costs.