Converting a Chapter 13 Bankruptcy to a Chapter 7 Bankruptcy
Jan 29, 2020
A Chapter 13 Bankruptcy is a 3 to 5-year repayment of some or all your debts based on your disposable income. A lot can change in that time frame. Depending on what has changed, converting from a Chapter 13 Bankruptcy to a Chapter 7 Bankruptcy might be a good option. First you need to determine the reason you filed a Chapter 13 Bankruptcy instead of a Chapter 7 Bankruptcy.
The most common reasons for filing a Chapter 13:
You had too many assets to protect in a Chapter 7.
You filed a Chapter 7 Bankruptcy within the last 8 years.
The reason you filed a Chapter 13 instead of a Chapter 7 Bankruptcy will have a large impact on whether you should or can convert your case. For instance, converting to a Chapter 7 Bankruptcy cannot protect your home from foreclosure if the arrearage has not been paid in full through the Chapter 13 Plan. Also, if you filed a Chapter 7 Bankruptcy within the 8 years before filing your Chapter 13 Bankruptcy and you convert to a Chapter 7, the court will dismiss your case.
Understanding the reason you filed a Chapter 13 Bankruptcy is the first step. Now that something has changed, the second step is deciding if you should convert to a Chapter 7. Many things can change in 3 to 5 years but not all changes are valid reason to convert your case.
The most common changes are:
You lost your job or other income.
Your expenses increased significantly, such as medical expenses.
You realize you cannot afford the Chapter 13 payments.
The asset you were trying to protect in the Chapter 13 was lost anyway.
You incurred new debt and need to add that debt to your bankruptcy.
Changing to a Chapter 7 can make things better, like no longer having to make a Chapter 13 payments, but it can make things worse, such as losing your cars or home. Sometimes the court will not allow you to convert the case. Since these consequences are so drastic, you should not convert your case without speaking with an attorney in detail about the situation. You need to look at what payments the trustee has made so far and plan how to deal with any negative consequences.
Your communication with your bankruptcy attorney throughout the Chapter 13 process is imperative to it being successful. If your attorney doesn’t know what issues you are having, then the attorney cannot help. Discuss the issues with your Attorney and they can review your options on what can be done.
Pedersen Law Office, LLC offers free consults in all our areas of practice and will meet with you personally to discuss your specific circumstances and see what options are available for you. Our law office serves the communities of Appleton, Neenah, Menasha, Oshkosh, Green Bay and their surrounding areas.