Making Sure the Law Is On Your Side

Should you convert your Chapter 13, or repayment plan, bankruptcy case to Chapter 7? This can be a good move for a variety of debtors if their circumstances change during the repayment period. To decide if it's right for you, here are some answers to important questions about the process.

Why Convert to Chapter 7?

Debtors who file for Chapter 13 bankruptcy usually do so for two reasons. The first is that their income prevents them from using Chapter 7, and the second is to keep certain secured assets (like a home).

But if your income falls and you can no longer viably pay your repayment plan, you may have no choice but to change tactics. In some cases, too, the debtor realizes that keeping their asset isn't really feasible or desirable. Therefore, liquidation bankruptcy may now be more appealing. 

Can You Convert Your Bankruptcy?

The good news for those whose finances have changed is that you can change your mind about bankruptcy too. The court allows you to convert your open case to Chapter 7 and take the liquidation option even though you've made payments to the repayment plan. As an alternative, you may choose to voluntarily dismiss your case and start over with a completely new one, using Chapter 7 as the route. 

What Needs to be Redone for Conversion?

If you decide to convert your case, some elements must be done again and others will carry over.

First, you must reconfirm your eligibility to declare Chapter 7 based on timing and income factors. Much of the initial paperwork, though, carries over to the new chapter since it's a continuation of an existing case. You may need to file some new forms based on the changes in what you owe and your income level. 

Creditors will likely be given new time to declare their claims to your assets. While you likely paid them some of the balance due, these updated claims will usually be made against your assets as they were when you initially started this bankruptcy case. The court will generally schedule a new creditors' meeting to account for these alterations. 

Where Should You Start Conversion?

Filing bankruptcy is complicated for most people. And when you need to change the way you're doing it midstream, it can become more complex. The best place to begin is by meeting with a skilled bankruptcy attorney in your state. They'll help you understand the pros and cons of conversion, complete the new steps required, and successfully exit no matter which chapter you choose. 

To learn more, contact a bankruptcy attorney near you.