When an individual files for a Chapter 13 under the U.S. Bankruptcy Code, it allows the debtor to repay all or a portion of his or her debt under the protection of the bankruptcy court. The debtor must file a plan for repaying the debts and make regular installment payments to a person called the chapter 13 trustee. The Trustee collects the payments and pays the required creditors in the manner outlined in the plan. While this plan is in effect, the court prevents collection efforts from the creditors.
The main difference in a Chapter 7 case is when the debtor’s non-Exempt Property is liquidated to pay as much as possible of the debts, while in a Chapter 13, a portion of the debtor’s future income is used to pay as much of the debt as is feasible.
How to Convert a Chapter 13 to a Chapter 7 Bankruptcy
One of the main reasons for converting bankruptcies is an inability to make payments under the Chapter 13 plan. Other reasons may include the inability to make car or mortgage payments after the plan has commenced. The primary requirement for converting from a Chapter 13 to a Chapter 7 bankruptcy is that the case has not previously been converted. (See also Converting Chapter 13 to Chapter 7 after Death).
Can You Pass the Means Test?
You will be required to fill out a new “Means Test” form. This form is used by the court to determine if the debtor is eligible to file for Chapter 7 bankruptcy. Your attorney will use information such as income, debts, and expenses to determine if the Means Test is met.
Following that, your attorney will need to file a “Notice of Conversion” with the bankruptcy court and there is a conversion fee that must be paid when this notice is filed. The trustee will make the final decision to approve or deny the debtor’s request based on the information the debtor and his attorney submitted, as well as any objections from the creditors.
How Lawyers Can Help
Converting a bankruptcy from a Chapter 13 to a Chapter 7 is the legal right of any debtor. However, since the bankruptcy laws are extremely complex and frequently changing, it is highly advisable to seek the assistance of an experienced bankruptcy attorney.
