Bankruptcy Lawyer Bryan W. Stone answers the question: “What is Chapter 7 Bankruptcy?”
Most people think that when you file for bankruptcy you only get one shot, pick the right chapter to file under and you’re done. Though it’s true that some people only file under one chapter of the bankruptcy code, it is also true that it is possible to switch at some point in the process. This switching between various chapters is known as converting. To find out more about converting a bankruptcy filing, keep reading.
The short answer is yes, you have the ability to convert. If you filed for bankruptcy and decide later that you want to switch and convert your case under a different chapter, so long as you qualify as a debtor as defined under that chapter, you are able to convert. One exception is that if you filed as a Chapter 13 and later want to convert your case into a Chapter 7, the conversion will be denied if you have received a Chapter 7 discharge anytime in the previous eight years.
Can you convert only one direction?
Typically, when people try to convert their bankruptcy they are moving from a Chapter 13 to a Chapter 7. This makes sense because a Chapter 13 bankruptcy involves structured payments to creditors while a Chapter 7 allows you to have your debts eliminated. Those who start out as Chapter 13 may decide they can’t keep up with the payment plan and choose to pursue a Chapter 7. Though this is often the direction that conversions take, it is not the only option. It is also possible for someone to initially file as Chapter 7 and, after getting into the process, decide that they would rather create a payment plan and convert to a Chapter 13.
Will you qualify?
If you’re trying to convert your Chapter 13 into a Chapter 7 (or the reverse), you need to be sure that you qualify as a debtor under whatever the new chapter is. For instance, if you’re going from a 13 to a 7, you need to be sure you pass the means test required of those seeking Chapter 7 bankruptcy relief. Conversion is not an easy way to bypass rules that would normally disqualify you.
Why might you want to convert?
As we briefly mentioned earlier, you might want to convert from a Chapter 13 to a Chapter 7 bankruptcy because your financial circumstances changed and you no longer find yourself able to keep up with the payment plan. Rather than simply default, you can ask to convert to a Chapter 7. Another reason might be if you filed for Chapter 13 to ensure you kept certain property but later decide you no longer want the property. In this case, it makes sense to switch to a Chapter 7, as you won’t want to make payments for property you no longer want to hold on to.
Why might the court force you to convert?
Though many conversions are voluntary, it’s also possible that you could be forced to convert by the bankruptcy court for cause. This can happen when you’ve failed to take necessary steps as part of your original bankruptcy filing or, in the case of a Chapter 13, failed to make plan payments on a timely basis. In these cases, the courts can convert your case to a Chapter 7.
If you are contemplating bankruptcy in the Charlotte area, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with legally sound advice for your particular situation.
About the Author
Kyle Frost joined Arnold & Smith, PLLC in 2013 where he focuses his practice on all aspects of civil litigation and bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.
Born and raised in upstate New York, Mr. Frost attended the University at Albany on a Presidential Scholarship, graduating magna cum laude with a double major in Political Science and Sociology. He went on to attended Wake Forest University School of Law in Winston Salem, North Carolina.
Following college, Mr. Frost spent over a year teaching English in South Korea. He worked in a private school in Seoul developing curriculum, English programs, and educating both children and adults that were interested in learning a new language.
In his spare time, Mr. Frost enjoys homebrewing, fishing, and travelling.
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