If you have filed for bankruptcy protection under Chapter 13, you have committed to making monthly payments to the trust to fund your repayment plan. A Chapter 13 plan lasts for three to five years, so many changes in your life can occur during this time. What happens if you lose your job, suffer a serious medical condition, or encounter other significant financial changes? If you discover you are no longer able to afford your monthly Chapter 13 payments, you should consider converting your filing to a Chapter 7 case.
The conversion process is fairly straightforward. We can file a Notice of Conversion with the bankruptcy court and pay the applicable fee. In most cases, your case will be converted to a Chapter 7 within a few days.
Once your filing has converted to a Chapter 7, a new trustee will be appointed to handle your case. The court will also schedule a new Meeting of Creditors. In some cases, the Chapter 13 trustee will return funds to you that were being held to make your plan payments. Upon conversion, this money belongs to you.
In order to comply with the Chapter 7 requirements, we will need to file additional pleadings with the court. For example, a Chapter 7 debtor is required to inform the court and creditors with what he/she intends to do with his/her secured debt. A form called a Statement of Intent is filed stating whether you intend to surrender or keep possession of the assets you pledged as collateral to your secured lenders.
It is also important to inform the bankruptcy court of any significant changes that have occurred during the time between your Chapter 13 filing and your conversion. This includes how your income has changed as well as listing any debts incurred before the date you converted your case so it can be eligible for discharge.
If you are struggling to meet the financial requirements of your Chapter 13 plan, don’t give up hope. Let us review your individual circumstances and determine whether you should consider converting your case to Chapter 7.
If you have questions regarding filing for bankruptcy protection or converting an existing case, contact us for a free consultation.