Especially in these fast-changing economic times, one person’s financial situation today may look different tomorrow.
This extends to the Arkansas bankruptcy process, especially if someone has started in one particular proceeding and the debtor court deems it’s no longer the right fit.
Why a Bankruptcy Conversion Might Be The Right Fit
If a debtor initially filed for a Chapter 13 bankruptcy, they were looking to pay off debts over a period of time and retain certain assets (like a home or something of exceptional value). If that person doesn’t want to or cannot hold onto those assets anymore, converting to a Chapter 7 bankruptcy might be a more viable option for quick liquidation.
How to Qualify for a Chapter 7 Conversion in Arkansas
First, the court will put the debtor through a means test to see if they have the resources to follow through with Chapter 13 repayment. In most cases, if the person does, the court will keep that bankruptcy as planned rather than start a conversion. There are potentially different stipulations for high-income filers, and, as expected, every individual case is unique in terms of available resources and assets to pay back debts.
An Overview of the Conversion Process in Arkansas
If a court deems conversion as the right move, the debtor will have to update all income and expenses and list any new debts incurred through the Chapter 13 proceeding up to that point. Then, creditor payment claims must be handled, and they may even file new Proofs of Claim, depending on the circumstances. The debtor will then meet with creditors to determine a new plan to resolve all outstanding debts.
Above all, this particular conversion process isn’t suitable for everyone (nor will it be approved for all cases). Still, it can help those who need to consolidate and liquidate a larger majority of assets more quickly.
Natural State Law understands that this process can be confusing and unclear. Call us today at (501) 916-2878 to discuss your personal situation with one of our knowledgeable bankruptcy attorneys to better understand your options when it comes to Chapter 13 and Chapter 7 proceedings.