In Bankruptcy

In these fast-changing economic times, today’s financial situation may look entirely different tomorrow.

Bankruptcy is no different. A case may be filed under Chapter 13, only to later be converted to a Chapter 7.

Why Convert?

Sometimes even though a reorganization under Chapter 13 was the debtor’s original goal, circumstances after the filing of the case did not cooperate. The debtor may have experienced a major illness that permanently reduced future income potential and required a reevaluation of the entire financial situation. Similarly, drastic household changes, such as immediate household members suffering severe illnesses, property provided for in the plan (such as the home or vehicle) suffering severe damage through no fault of the debtor, or even becoming unemployed and unable to find replacement income might qualify as enough of a change in circumstances to justify converting a case from a Chapter 13 to a Chapter 7, provided the debtor is willing to let any secured property go.

How to Qualify for a Chapter 7 Conversion

Much like when the case was filed, the debtor must undergo the means test to determine whether he is eligible for a Chapter 7 or whether he must continue to make payments to his unsecured creditors instead of converting. Every case is different, and depending on the particular change in circumstances that led to considering a conversion, the bankruptcy court may have discretion to allow the case to proceed as a Chapter 7.

An Overview of the Conversion Process

As part of the conversion, the debtor must file updated income and expense schedules, and should list any new debts incurred during the Chapter 13 case, such as unpaid medical bills. A new trustee will be appointed to oversee the administration of the Chapter 7 case and the Chapter 13 trustee will file a report showing all of the receipts and disbursements made during the case.

Natural State Law understands that this process can be overwhelming. Call us today at (501) 916-2878 to discuss your personal situation with one of our qualified bankruptcy attorneys to better understand your options when it comes to Chapter 13 and Chapter 7 proceedings.