Mechanism 61

Dismissing a Chapter 11 by agreement

Can a Chapter 11 case end without a confirmed plan?

Yes, and often it should. Where the case has done its work — the stay bought the time, the parties reached terms, the debt was restructured by agreement — an agreed dismissal is faster and far cheaper than confirmation, and it puts the debtor out from under the estate rather than under a plan it then has to perform.

By John P. Henry · 11 U.S.C. § 1112(b) · Reviewed 2026-08-02

The authority

[O]n request of a party in interest, and after notice and a hearing, 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, for cause …11 U.S.C. § 1112(b)(1)

11 U.S.C. § 1112(b)

When it applies

The single-asset or single-issue Chapter 11 filed to stop a foreclosure or an execution sale while a deal gets done. Once the deal is documented and funded, confirmation is expensive theatre.

How it is proved up

Document the settlement first and dismiss second. The order should recite what the parties agreed, so the dismissal is the last step rather than the hope.
Support it with a declaration from someone with knowledge of the estate — what creditors are being paid, from what source, and why dismissal serves them better than conversion.
Address the alternative expressly. The court must choose between conversion and dismissal on the best interests of creditors and the estate, so the motion has to say why dismissal wins.
Clear the record afterwards. Terminate the financing statements, release the liens, and file what the settlement requires — a dismissal that leaves encumbrances in place has not finished the job.
Get administrative claims and fees resolved before dismissal, because the forum disappears with the case.

What defeats it

Creditors who prefer a Chapter 7 trustee to look at pre-petition transfers, and who will say so.
Unpaid administrative expenses, which the court will not simply abandon.
A record suggesting the filing was in bad faith, where dismissal looks like escape rather than resolution.
The United States Trustee, whose view on conversion versus dismissal carries weight.

Where I have used it

In re ARGDOWNTOWN, LLC · United States Bankruptcy Court for the Northern District of Texas. Voluntary petition in February 2023; agreed motion to dismiss the following month supported by a principal’s declaration; signed agreed order of dismissal; settlement executed in June 2023, with UCC-3 terminations filed to clear the record.

The order

Document
to be added

Agreed Order of Dismissal · Bankr. N.D. Tex.

The signed judgment in this matter is being retrieved from the file and will be published here in full, as the others are.

Questions

Can a Chapter 11 case be dismissed instead of confirmed?

Yes. Section 1112(b) permits dismissal or conversion for cause, and where the parties have resolved matters consensually a dismissal is frequently the outcome that best serves creditors and the estate.

What is the difference between dismissal and conversion?

Dismissal ends the bankruptcy case and returns the parties to their non-bankruptcy positions. Conversion moves the case to Chapter 7, where a trustee liquidates the estate and may pursue avoidance actions. The court chooses between them on the best interests of creditors and the estate.

Does dismissing a Chapter 11 undo the automatic stay?

Yes. The stay terminates when the case is dismissed, under 11 U.S.C. § 362(c)(2)(B), so any creditor remedy that was halted may resume unless the settlement provides otherwise.