Schlehuber v. Fremont National Bank & Trust Co. (In re Schlehuber)
- Schlehuber v. Fremont National Bank & Trust Co. (In re Schlehuber), No. 12-6063 (B.A.P. 8th Cir. April 9, 2013)
- 11 U.S.C. 706(b) states that on request of a party in interest, the court may convert a case under chapter 7 to a case under chapter 11. Thus, nothing in the statute requires that the debtor's interest should control whether the case is converted. The bankruptcy court's finding that the debtor's ability to to pay was "far and away an important factor under section 706(b)" was therefore "consistent with the statute, supported by the record, and properly within their discretion."
- Procedural context:
- The Eighth Circuit BAP affirmed the ruling of the Bankruptcy Court for the District of Nebraska - Omaha. The bankruptcy court had previously exercised its discretion under section 706(b) to convert the debtor's Chapter 7 filing to a case under Chapter 11.
- The debtor and his wife filed a voluntary petition under Chapter 7. Although their debts were primarily business obligations, their schedules indicated that the debtor had significant income that resulted in a considerable monthly surplus. An unsecured creditor moved to convert the Chapter 7 case to one under Chapter 11 pursuant to section 706(b). In support, the creditor maintained that conversion was in the best interest of all parties because the debtor could fund a Chapter 11 plan. The debtor countered by arguing that his income varied greatly, and that conversion would not promote rehabilitation of their affairs.
- SCHERMER, NAIL, AND SHODEEN
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