Can I Convert My Case?
Whether you file a Chapter 7 or a Chapter 13, situations often change and converting your case to a different chapter is often the best option. This blog post will highlight when you should consider converting your case and how to go about the conversion. As always, it is best to consult with a bankruptcy professional before making any decisions in your case. If you already have counsel, you should contact them immediately. If you represent yourself or are no longer represented, our office offers free consultations. Contact Detroit Lawyers at 248-237-7979.
Converting from a Chapter 13 to a Chapter 7
In a Chapter 13 repayment plan, monthly payments must be made to the Trustee in order to advance the case to discharge. Oftentimes, it is no longer necessary for Debtor’s to be in a Chapter 13 Plan. Below are some examples:
Reduction of Income: Many times an individual has to file a Chapter 13 is because they make too much income to file a Chapter 7. If you receive a reduction of income or lose your job, it might be in your best interest to convert the case to a Chapter 7 and discharge your debt in 90 days.
Example: Debtor A was making $75,000 and filed a Chapter 13 bankruptcy with a payment of $300 per month. Debtor A paid on your plan for 7 months, but was laid off. Debtor A now may able to convert his case to a Chapter 7 and discharge all his debt without having to go on the court ordered payment plan.
Surrendering Secured Debt: Another reason to file a Chapter 13 is to keep a home or car that has built up a large arrearage. If you are in a Chapter 13 repayment plan and no longer want the property, you can surrender the property and convert to a Chapter 7 to eliminate the remainder of your debt.
Example: Debtor B was facing a foreclosure on his home that had an arrearage of $10,000. He filed a Chapter 13 and was paying back the arrearage over 5 years in a Chapter 13 plan. This winter, he decided that it was too cold in Detroit and was going to move to Florida. Debtor B can convert to a Chapter 7, surrender the home, eliminate the rest of his debt and go enjoy the Florida sunshine.
Current on Secured Debt Arrearage: Similar to above, if you are in a Chapter 13 repayment plan and you cure the arrearages on a home or vehicle before the plan is through, you can convert the case to a Chapter 7 without facing recourse from the Creditor.
Are you eligible to Convert? It is important to consult with an attorney concerning conversion as there are a number of factors that will determine if you can convert. This includes if your income is low enough to file a Chapter 7, if all assets are going to be able to be protected in a Chapter 7 and if you have not filed a Chapter 7 in the previous eight years.
Steps to Convert Your Case from a Chapter 13 to a Chapter 7
- File a Notice of Conversion with the court. Once the court receives the Notice, the court will send a notice to your employer to stop any active payment orders. Any funds that accidentally come in post confirmation will be refunded to the Debtor.
- File Amended Schedules with the Court: You must file an amended Schedule I and J to reflect your current monthly income and expenses.
- File Disclosure of Attorney Fees (If applicable)
- Pay the difference of the filing fee between a Chapter 7 ($335.00) and a Chapter 13 ($310.00): You must pay $25.00 the court.
- Attend the Chapter 7 341 Meeting (regardless if you already attended a Chapter 13 Meeting)
- Complete your Online Debtor Education Course: This must be done 45 days after the 341 Meeting is held. We suggest using Debtoredu.com.
Converting from a Chapter 7 to a Chapter 13
Although it’s rare, there are a few instances when it would be beneficial or required to convert to a Chapter 13:
- If the US Trustee issues a “Presumption of Abuse” and finds that your monthly income is too high to file a Chapter 7, they may file a Motion to Dismiss your case based upon your income. You would then have the option either to contest the motion or voluntarily convert your case to a Chapter 13 where you will be subjected to a five year repayment plan.
- If you fall behind on your car or mortgage payments, it may be necessary to convert the case to a Chapter 13 in order to pay down the arrearages over time to avoid repossession or foreclosure.
Steps to Convert your case from a Chapter 7 to a Chapter 13
- File a Motion for Conversion with the Court: This should outline the reasons you are converting and show that you can pay your Chapter 13 Plan. The motions are usually approved.
- File Amended Schedules with the Court: You may have to amend some of the schedules to include any income changes and any new debt.
- File Chapter 13 Plan
- Attend the Chapter 13 341 Meeting (regardless if you already attended a Chapter 7 Meeting)
- Attend the Chapter 13 Confirmation Hearing (if necessary)
- Complete your Online Debtor Education Course: This must be done before the conclusion of the plan.