Your case will be significantly impacted by the type of bankruptcy chapter you choose to file. It has an impact on the property you can keep, the kinds of payments you must make, and the length of the entire process. What happens if your situation changes after filing? Is there a way to change chapters?
We’ll go over how to change a Chapter 7 bankruptcy to a Chapter 13 bankruptcy or a Chapter 13 bankruptcy to a Chapter 7 in California below. To ensure your bankruptcy is discharged and you’re on the road to financial recovery, it is best to consult with an experienced California bankruptcy lawyer.
Converting a Chapter 7 Bankruptcy to a Chapter 13 Bankruptcy
Ideally, when you file for a Chapter 7 bankruptcy, there will be no need to convert the case to Chapter 13, but occasionally it may be important you switch to the correct chapter to preserve your assets. In cases like this, conversion to Chapter 13 and ensuring you have competent legal counsel will be imperative.
When someone is considering bankruptcy filing, an attorney will review your financial situation, including income, assets, and expenses, to determine what type of bankruptcy would be most beneficial for your situation. Chapter 7 is a liquidation bankruptcy, so if you have any assets that cannot be fully protected by California exemptions, the court will seize and sell these assets to pay your creditors. A qualified bankruptcy lawyer will help you determine if your assets are protected before you file for Chapter 7 or if there is any asset that may be at risk. If an asset is not protected, you may decide to file Chapter 7 regardless and let the court sell the item to help you pay your creditors if you have an inability to pay your debt.
So why would someone want to switch to a Chapter 13? Chapter 13 bankruptcy allows you to keep any exposed assets and instead make payments to the bankruptcy court to pay back your creditors. People who have exposed equity in vehicles, homes, or other assets often file for Chapter 13 bankruptcy to keep these assets. Unfortunately, some people decide to file bankruptcy without consulting an attorney and are surprised to find out an asset is going to be sold by the court that they didn’t realize was not protected. They are then left scrambling to find an attorney to help them convert the case to Chapter 13. Alternatively, sometimes a client who was willing to let an exposed asset be sold has a change in financial circumstances so they have the ability to keep the asset and make monthly payments instead.
However, the conversion of a case from Chapter 7 to Chapter 13 is not so clear cut as simply switching from one chapter to another. You must prove that the conversion was filed in good faith and show why you are suddenly able to make payments to the bankruptcy court under Chapter 13 when you initially filed a Chapter 7 asserting you could not afford to make any payments to your creditors at all. Furthermore, your Chapter 7 Trustee may be entitled to be paid in your Chapter 13 case or even object to your conversion, and your conversion must be approved by the court. If you do successfully convert to Chapter 13, failure to make your monthly plan payments will usually result in the case being re-converted to Chapter 7 instead of dismissed so the asset can be sold. As such, it is important when filing a Chapter 7 that you make sure that Chapter 7 bankruptcy is the best decision for your situation. As always, we recommend consulting with a qualified bankruptcy attorney before you file to make sure you proceed correctly.
Converting a Chapter 13 Bankruptcy to a Chapter 7 Bankruptcy
Chapter 13 filing can be beneficial to people who are struggling with their debt but have enough income to support a monthly payment. As discussed above, it can protect your assets that would otherwise be sold in a Chapter 7 filing, help you pay back debt that is not dischargeable (such as taxes and back child support), or help you get current on mortgage arrears to keep your home out of foreclosure. As such, Chapter 13 is a power that can help someone struggling financially in many different ways.
The average Chapter 13 repayment term is 60 months, and a lot of things can change while you are in repayment. Occasionally, a change in income can result in the inability to maintain your Chapter 13 plan payments, and sometimes, conversion to Chapter 7 is the best option.
However, there are a number of factors that may make conversion infeasible. Chapter 7 will not take care of non-dischargable debt or allow you to get current on mortgage or vehicle arrears. If you convert to a Chapter 7, your arrears may put your property at risk of foreclosure or repossession and any debts that do not discharge will still be owed after your converted Chapter 7 case is discharged. If you filed Chapter 13 because of exposed assets, converting will also put those assets back at risk of liquidation.
There is also the possibility you may not qualify to convert the case. Prior Chapter 7 filings may prevent the conversion of a case if filed within eight years of your Chapter 13 filing, and your income must qualify you for filing Chapter 7 bankruptcy. Just like converting a Chapter 7 to a Chapter 13, consulting with a bankruptcy lawyer is your best bet and ensuring you proceed correctly.
Can my Bankruptcy be Forced into Conversion?
The court may order you to switch from one type of bankruptcy to in certain situations. The court may order you to convert if your payment plan is not approved in a timely manner or if you fail to make your scheduled plan payments.
If you let your case drag on and hurt your creditors, the court might also order conversion. If you made a mistake on your means test or schedules and you don’t qualify for Chapter 7, the court may order you to convert from Chapter 7 to Chapter 13.
Is Conversion Appropriate for Me?
Converting your bankruptcy case from one chapter to another necessitates the submission of specific motions, forms, and schedules. Simple errors can have serious consequences, so consult with an experienced California bankruptcy attorney at Winterbotham Parham Teeple, a PC. An attorney can advise you on whether a conversion is the best option for you. Whether it is or not, your attorney can assist you in navigating the complicated bankruptcy system and making the most of your filing. Call 800.400.9000 today!