Converting Chapter 13 to Chapter 7 Bankruptcy is something you can do so long as you qualify. Because of the long nature of Chapter 13 bankruptcy plans, it’s not uncommon for circumstances to change drastically at some point during the plan. Bankruptcy trustees are generally willing to make small modifications for small problems or emergencies. For example, needing to replace a broken household appliance like a washer or refrigerator. However, some changes directly affect the ability to make plan payments. These may be an injury or the loss of a job. In those cases, more drastic measures may need to be taken like Converting Chapter 13 to Chapter 7 Bankruptcy.
Converting a Bankruptcy from Chapter 13 to Chapter 7
The bankruptcy laws, specifically in 11 U.S.C. §1307 allow any debtor to convert a bankruptcy. This is generally a Chapter 13 to a Chapter 7 at any time, for any reason. However, the debtor must actually qualify for a Chapter 7 at the time of conversion. Otherwise, the conversion will not work. To be successful you must jump three primary hurdles.
Means Test and Converting Your Chapter 13
First, the debtor must pass the “means test.” This is a measurement of income which the court uses to determine a person’s eligibility. It will consider a six month snapshot of your income. This will approximate what a yearly income may look like. Then, this figure will compare to an average family income of a similar family. If the approximated income if over the average, then you will not qualify for a Chapter 7 bankruptcy. You must now consider a Chapter 13 instead.
Amending Bankruptcy Schedule I & J
The second hurdle is similar, but has a slight deviation from the first. Inside the bankruptcy petition there are two documents, Schedules I & J. These list income and expenses. As a result, it deduct the expenses from your income to show your actual disposable income. Disposable income is generally fairly high for families that file Chapter 13 bankruptcies. However, if during the Chapter 13 payment plan, you or your partner loses their job you may be eligible for converting a bankruptcy. Thus, an amendment to the bankruptcy petition should file to show the income change. The US Justice Department will require you to pay a Chapter 13 payment plan though if you have the “ability to pay” based on your disposable income. Therefore, they could reject your petition to convert a bankruptcy to a Chapter 7.
Timing and Previous Bankruptcies
The third hurdle regards the timing and if you have previous bankruptcies. You must though, first pass the means test and the Schedule I & J tests to reach this step. If you have never filed a bankruptcy, then this step is no hurdle at all. However, if you have previous bankruptcies then you might have a problem converting your current bankruptcy. If you have a previous Chapter 7 bankruptcy, then you must wait 8 years before filing another Chapter 7. The debtor can within this 8 years though file a Chapter 13 bankruptcy. But, if you file a Chapter 13 within the 8 year period after a Chapter 7, this will never be eligible for a conversion to a chapter 7. You can file to dismiss the Chapter 13 though, then re-file under a Chapter 7.
Tulsa Bankruptcy Lawyers Converting Your Bankruptcy Case
If you are in a Chapter 13 bankruptcy payment plan and need help Converting Chapter 13 to Chapter 7 Bankruptcy. Our attorneys have years of legal experience in the bankruptcy field. We can walk you through the process with minimal work from you. Free consultation.