Can I Convert My Chapter 7 or 13 Case to a Different Type of Bankruptcy?
Some times circumstances change during the course of a bankruptcy filing that my necessitate converting your case from a Chapter 13 to a Chapter 7 or vice versa. If you circumstances have changed, you should consult with an attorney before taking any action as there are qualifications and implications for converting your case. We usually encourage clients that are already represented by counsel to discuss their case with their attorney of record. However if a person does not wish to continue with their current representation we do offer a free consultation to discuss options to substitute counsel.
Converting from a Chapter 13 to a Chapter 7
A Chapter 13 bankruptcy is a court authorized repayment plan that allows you to pay back your creditors and reduce debt over a period of 36 - 6o months. Some times circumstances change in that time period that may cause a Chapter 7 to make more sense for your finances. Examples of these circumstances are:
- You wish to surrender real property such as a home or vehicle that you were previously financing through the Chapter 13 and can no longer afford the payments or wish to keep the property.
- You become current on secured debt obligations, such as a mortgage or car loan, and just have unsecured debt left to pay through the plan and otherwise meet the requirements to file a Chapter 7
- Your income decreases to the level where the Chapter 13 plan is no longer feasible or you now qualify for a Chapter 7.
- You incurred additional debt while in the Chapter 13 bankruptcy (i.e. medical bills) that make your repayment plan infeasible.
Things to Consider Before Converting Your Bankruptcy Case from a Chapter 13 to a Chapter 7:
There are many factors to evaluate before determining if a case conversion is in your best interest:
- You must past a "Means Test" in order to qualify to convert or file a Chapter 7. This factors your last 6 months worth of household income .
- You must be current on secured debt obligations such as a home or car loan or risk loosing them.
- You need to consider the value of your assets, such as a possible appreciation of real property (i.e. home value), to ensure that converting to a Chapter 7 bankruptcy won't put your ownership at risk. You have certain exemption levels in a Chapter 7, but you need an experienced bankruptcy attorney to help you understand if you fit in to those parameters.
- Have you had a previous Chapter 7 discharge within the past eight years? If so, you may not be eligible for a discharge after the conversion, therefore not allowing you to eliminate debts. In this case, it may be more beneficial to continue in the Chapter 13 plan and improve your credit. You can receive a discharge of debts under a Chapter 13 if you filed the case at least four years after a previous Chapter 7 filing.
Steps to in the Bankruptcy Conversion Process:
In order to convert from a Chapter 13 to a Chapter 7, you will need to complete the following steps:
- File paperwork with the court, including:
- Notice of Voluntary Conversion;
- Amended Schedules;
- Disclosure of attorney fees;
- Filing fee of $25.
- You will be required to attend a new 341 Hearing, even if you completed a 341 Hearing during your Chapter 13 case.
- You need to complete the post-filing credit counseling referred to as the Debtor Education Course. Once completed, your attorney will file the certificate of completion with the court that makes you eligible for a discharge.
Converting from a Chapter 7 to a Chapter 13 Bankruptcy
There are circumstances that require you to convert from a Chapter 7 debt elimination program to making repayment efforts under a Chapter 13 plan. The most common reason that a case converts from a Chapter 7 to a 13 are:
- You fall behind on your secured debt during the Chapter 7 process and are facing creditor action such as a home foreclosure or vehicle repossession. A Chapter 13 will protect this property and help you to set up repayment terms based on your individual income and expenses. A Chapter 7 may delay a foreclosure or repossession, but it will not provide long term protection if you wish to keep the property.
- A creditor or more likely the US Trustee's office may challenge your Chapter 7 filing as being in "bad faith." This means that they believe you have available income to make a "good faith" effort to pay your creditors back a portion of what you owe. They would file a motion with the court and we would have the option to:
- Contest the motion;
- Voluntarily convert the case to a Chapter 13 debt consolidation plan, even if the repayment efforts are minimal (i.e. pennies on the dollar).
Trust Our Bankruptcy Experience
As you can see, there are many factors to consider before converting your bankruptcy case. We are here to answer your questions and help determine the best course of action. Call us today at 866-261-8282 for a free consultation with a qualified Michigan bankruptcy attorney. Gain the peace of mind that comes with quality legal representation from experienced attorneys.