When you decided to file for bankruptcy, you chose Chapter 13 to be able to save your car and your home. Since then, however, you got laid off from your job and can no longer afford to make the monthly payments that you agreed to pay your creditors.
What can be done at this juncture? Is it too late to file under Chapter 7?
You can sometimes convert to Chapter 7 after filing Chapter 13
The good news is that it just might be possible to convert your more-involved Chapter 13 filing to a clean-slate Chapter 7. The bad news is that it means that you can now pass the mean’s test to file Chapter 7, where before your assets, income and resources exceeded the limits.
The bankruptcy courts understand that things happen that are not within the debtors’ control. Job losses, divorce, serious illness and other factors can all prevent debtors from living up to their financial commitments to the agreements approved by the bankruptcy courts. That’s why the bankruptcy code permits converting Chapter 13 bankruptcies into Chapter 7.
Don’t assume conversion is a given, however
What if you just no longer want to be so financially restricted for three to five years and just quit making timely payments to your creditors? You want to be finished with the whole bankruptcy business in a few short months. You know that Chapter 7 could be over in a matter of months.
Will the court allow you to convert? Don’t bet on it. The court will demand proof of adverse circumstances that affect your repayment schedule. If they don’t see a substantial reduction in earnings or other significant changes, your request won’t go very far.
Meet with your bankruptcy attorney to review your circumstances. If you determine that you qualify for a bankruptcy conversion you can begin the process.