There are times when someone will need to, or may want to convert their Chapter 7 bankruptcy case into a Chapter 13 bankruptcy proceeding, or vice versa. If you file for bankruptcy, you have this right to convert your case one time. Learn the reasons why you might want to convert your bankruptcy case, and to learn how you can go about this process.
How to Convert a Chapter 7 Bankruptcy Case into a Chapter 13 Case
As long as you qualify for Chapter 13 bankruptcy, you can file a motion to convert your case. You will need to show a court why you want to convert your case and that you are qualified for a Chapter 13 bankruptcy. If you are indeed eligible, then a court is probably going to accept your motion to convert.
Why would you want to convert your Chapter 7 case? One obvious reason would be that you are not eligible for Chapter 7 bankruptcy. Perhaps you cannot pass the means test, or perhaps you are in a position where you can save your house or other property by repaying those debts through the Chapter 13 bankruptcy process, where your debt is restructured, enabling you to pay off debts.
If you convert to a Chapter 13 bankruptcy, you might be able to eliminate junior liens such as a second mortgage. You might also be able to cram down a car loan. You cannot do either of these in a Chapter 7 proceeding. Then there are debts that a Chapter 7 bankruptcy cannot discharge, such as spousal and child support payments, or some tax debts. Through Chapter 13, you could eliminate this debt by paying it off.
How to Convert a Chapter 13 Bankruptcy Case into a Chapter 7 Case
If you have not had your debt discharged in a Chapter 7 bankruptcy in the last eight years, then you may be able to convert your Chapter 13 case. When you file to request this conversion, you may have to go back and change your bankruptcy forms, as well as fill out a Statement of Intention. This document outlines what you want to happen with your secured debts. There are some states where you might be told to re-file your schedules. You will also have to go to another meeting of creditors.
So why would you want to convert your Chapter 13 case? Sometimes, there is no choice, because a bankruptcy court could instruct you to convert your case. This could if your situation has changed, and you cannot meet your Chapter 13 repayment plan, or if you are late in your payments. You may want to convert the case if you filed for Chapter 13 bankruptcy in order to protect your property, property that you have now realized you do not wish to hold onto.
Even though you have the one-time right to convert your bankruptcy case, you have to qualify for the case you are converting to. So if you are converting to a Chapter 7 bankruptcy case, you will have to be eligible for this process. Primarily, this means being able to pass the means test, usually speaking. There some courts that have said passing this test is not necessary if you are converting your case, while others have ruled that debtors have to pass the means test, even if they are entering the Chapter 7 process through a conversion.
Before you file for bankruptcy or convert your case, it would be in your best interests to consult with a bankruptcy attorney to learn which processes you qualify for, and which would provide you the best route to a strong financial future. Find a legal expert on our directory today!