Document Type
Research Memorandum
Publication Date
2025
Abstract
(Excerpt)
Section 1112 of title 11 of the United States Code (the "Bankruptcy Code") provides that a Chapter 11 case can be converted or dismissed, upon the request of an interested party, "for cause." While cause is required, the Bankruptcy Code does not provide a definition. Rather, section 1112(b)(4) provides a non-exhaustive list of examples that constitute "cause." In addition to the statutory examples, almost all courts interpret "cause" to include a lack of good faith. The Bankruptcy Code also does not define good faith, resulting in courts adopting different approaches to determine good faith. Therefore, when an interested party moves to dismiss or convert a Chapter 11 case for a debtor’s lack of good faith filing, the outcome depends on the court’s interpretation of good faith.
This article analyzes the good faith basis for dismissal or conversion under section 1112 and describes the different tests to determine good faith adopted by the circuit courts. Part I explains the pertinent provisions of the Bankruptcy Code. Part II examines how circuit courts apply different tests to determine if a case was filed in good faith. Part III explains that the United States Court of Appeals for the District of Columbia (the "D.C. Circuit") has not adopted a good faith test.