Chapter 13 case is confirmed. You have been making your plan payments faithfully then from out of the blue some disaster or emergency strikes. Everything changes:
- You or your spouse are laid off
- One or both of you lose a job
- Illness or Disability of someone at home
- You again fall behind on your mortgage
- Your car dies
Suddenly the chapter 13 bankruptcy that was the answer to all of your problems becomes one of the problems. What can you do? The bankruptcy Code knows that stuff happens. Some of your choices are:
- Moratorium or gap in plan payments if the problem is very temporary
- Voluntary dismissal, come back when things get more even.
- Conversion to a chapter 7 case
You need to be qualified to be a debtor under chapter 7. The basic requirement for this is that you must not have had a chapter 7 case filed and closed within the past 8 years of when you filed the chapter 13. It goes filing date to filing date. The procedure to convert your case is easy:
- Prepare and file a notice of conversion
- Pay the $25 filing fee for conversion
- File a motion and order to terminate the pay order
- File a notice under bankruptcy rule 1019 to update any of your schedules as needed to reflect a reduction in income, and most importantly any new creditors you took on after you filed your chapter 13 case.
Once it is converted, it may be necessary for you to attend another meeting of creditors with a chapter 7 trustee. I say “may” because the trustee can elect not to have a meeting of creditors. It is not common, but I have had it happen in two cases this past year.
Conversion Might Not Be Available, Now What?
If when you filed your chapter 13 case, you had a previous chapter 7 filing within the past 8 years there can be no conversion. To switch to a chapter 7 case under these circumstances you need to dismiss the chapter 13 case, and then file a brand new chapter 7.
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