When you face financial woes, and decide to file for bankruptcy protection, your first inclination may be to file a petition under Chapter 7, where you can permanently discharge debts and be done with them. However, you may not qualify under the new rules governing Chapter 7 filings, or you may discover that you have compelling reasons to go into Chapter 13. The good news is that you can successfully amend your Chapter 7 petition to a Chapter 13 filing.
Reasons to Consider Converting a Chapter 7 Filing
There are a number of reasons you may decide to change your Chapter 7 liquidation proceeding to a Chapter 13 reorganization:
- You may not pass the means test required for Chapter 7—Under the 2005 revisions to the bankruptcy laws,people with very high incomes may not be eligible for a Chapter 7 bankruptcy.
- You may want to keep all your property or have a lot of nonexempt property—You may decide that you don’t want to sell certain items of property to satisfy creditors. A Chapter 13 bankruptcy proceeding will allow you to keep assets, but will give you a respite from payments while you work out a reorganization plan.
- You may have significant debts that cannot be discharged in bankruptcy, such as child support arrearages, tax debts or student loan payments and need the protection of bankruptcy to repay them in an orderly fashion.
- Chapter 7 may only postpone foreclosure or repossession efforts—In a Chapter 13 proceeding, you can catch up on mortgage arrears. . As long as you make regular monthly payments outside of your Chapter 13 plan and make your monthly Chapter 13 payment,, your creditors cannot move forward with repossession or foreclosure proceedings. A Chapter 13 filing can help you reduce obligations on secured debts, such as cars or homes—You can use Chapter 13 to “strip” a second mortgage from real property, or to “cram down” a car loan.
The process for converting from a Chapter 7 to a Chapter 13 is simple. You must file a motion with the court, state your reasons for changing your petition, and demonstrate that you can afford the payments in a Chapter 13 filing.
Contact John Hargrave and Associates
We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-759-6022 (toll free at 866-662-3191).