Completely fair. First, there is a filing fee to convert that has to be paid. Second, there is additional work to be done to convert the case. Frankly, my office charges more for a Chap. 13 than what you were charged, and we charge to convert cases as well.
The automatic stay has nothing at all to do with extending you future credit or wishing to do business with you. If you discharge on a debt to a creditor, they certainly can refuse to do business with you in the future - credit unions are notorious for this as are non-emergency medical providers. Utilities are also doing this - what they'll say is, "Okay...you discharged the power bill you owed us. Now, you are coming to us for service at a new residence. We'll give you service, but you'll...
It depends - if the action that caused the death was something serious, like a DUI, intentional act, etc., it is possible to have it rendered non-dischargeable. But, you'll have to launch an adversary action in the person's bankruptcy and have the bankruptcy court agree it's non-dischargeable.
You are 100% incorrect. If the deceased had a life insurance policy with a named beneficiary, the money goes directly to that beneficiary - the deceased creditors cannot take a dime of it since the money didn't belong to the deceased.
You are 100% correct in not making any agreement. Frankly, if there is a bank "trustee" involved, that means that someone is taking over the operations. The former CEO could have merely been trying to get cash for himself in making an offer to you - how did he have the authority to do that if someone else has taken over? Wait until you're contacted by whomever is placed in charge and then make them an offer. Everything should be in writing.
The bank statements are not filed with the paperwork to the court - they are given to the trustee. I would strongly suggest you hire an attorney - there are a lot of issues that you'll need help with to resolve and perform properly.
No, they can't. First, if you never agreed, either verbally or (more importantly) in writing, to have them perform services, then you have no contract with them. Frankly, it sounds like they are nothing more than a fly-by-night company that shows up in the wake of a storm to do shady work at wildly inflated prices. Now, they COULD claim that they performed work and deserved to be paid, but certainly not at the prices you list. I doubt they'll sue you, and you certainly could win that...
You certainly can file bankruptcy and include payday loans in your petition. I would question, however, whether they are "payday" loans in the traditional sense or whether you pledged some kind of collateral since you don't have an "income" per se - SSI benefits aren't something that a payday lender would usually accept since they cannot be garnished like a regular paycheck. Whether you keep the house or car depends on liens, value, etc. Consult with a local bankruptcy attorney.
That's a very good question - debts discharged in bankruptcy are not income, and if you did receive a 1099 from the lender, form 982 would be filed to remove it from income. If you perform a short sale, however, they "could" issue you a 1099 for the unpaid difference, but it doesn't happen a lot in my experience.