Converting a Chapter 7 Bankruptcy Petition to A Chapter 13 Filing

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).

What Can I Do with Student Loan Debt?

Are you struggling under a mountain of debt, including student loans? Have you contemplated seeking bankruptcy protection, but heard that student loan payments may not be discharged in a bankruptcy filing? There are strategies available that can help you get your debt under control. The law office of John Hargrave and Associates can help.

Student Loan Payments and Bankruptcy

As a general rule, a student loan payment cannot be discharged in a Chapter 7 bankruptcy proceeding. The limited exception is when you can show that paying them back would result in an undue hardship on you. The circumstances under which such relief is granted are extremely rare. Under the test typically applied, you must show that you cannot maintain a minimum standard of living for you and your dependents if you have to repay the loans, that your current financial situation is unlikely to change for a significant time, and that you have made a good faith attempt to repay your student loans. As a practical matter student loans simply cannot be discharged in bankruptcy.

Even though you may not be able to discharge student loan debt, bankruptcy can help you manage that debt. First, by discharging other debts in bankruptcy, you can reduce the other debts that you have to pay, which makes your student loan payments more affordable. In addition, you can put student loan payments in a Chapter 13, or debtor reorganization, bankruptcy.

For purposes of Chapter 13, student loans are considered non-priority unsecured debts, similar to credit card or medical bills. This means that you are not required to pay them in full through a Chapter 13 filing. It also means that your student loans will only get a pro rata share of any amount paid to unsecured creditors in a Chapter 13 plan. Accordingly, during the period of the bankruptcy, you can negotiate a reduced monthly payment on your student loans. If your income is negligible, you may not have to pay anything.

While the bankruptcy is in effect, you will have the protection of the automatic stay (creditors will not be able to call or write in an attempt to collect from you). Interest will accrue, though, during the period of the bankruptcy, and you will be required to repay your student loans in full when the Chapter 13 bankruptcy period is done.

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 856-547-6500.

Debt Settlement: Lowdown on Debt Settlement in New Jersey

Is debt settlement a good idea, possibly too good to be true?

Let’s take a look at what happened to divorced fulltime working New York mother of four Judy Orlando when she signed on for debt settlement to help her get $30,000 in credit card debt under control.

Offers to Resolve Debt Problems

Judy had received a notice from Nationwide Asset Services, a Phoenix-based company. Nationwide said it would be able to get Judy out of debt in 18 to 24 months. They also promised that her credit would actually be better than it was before she got into debt.

Judy paid the debt settlement company’s $1,300 initial fee and then began paying $350 a month, as Nationwide requested per the agreement. She followed all other instructions, too: change her phone number, stop paying creditors, and cut off all contact with creditors.

Pays out $10,000 But Credited for Only $3000!

After paying Nationwide more than $10,000, Judy reduced her credit card balances by less than $3,000 and paid Nationwide nearly $7,000 in fees. Nationwide never told herher that her interest rates and penalties would continue to rise.

A Bad Situation Made Worse

In the end, Judy’s creditors sued her and then they placed liens on her home.. Ultimately Judy filed for bankruptcy protection and only then was able to resolve her debt problems.

Nationwide Debt Company Sued

Meantime, the state’s attorney general sued Nationwide for false advertising and fraudulent business practices. According to the lawsuit filed by Attorney General Andrew Cuomo, just one third of one percent of those who signed on and paid Nationwide actually got the agreed-upon 25 to 40 percent debt reduction.

Debt Settlement a Bad Idea?

Stories like these are commonplace. The debt settlement company asks you to withhold payment to creditors. You do this, because you do not know any better and you trust that they will do what they say they are going to do.

You go ahead and pay the settlement company a large sum. Meantime, interest rates and penalties are skyrocketing on your credit card bills. And creditors are now beginning to call you and harass you. Their job is to collect money from you, and they are not very nice about it.

Debt settlement companies cannot legally guarantee that they will be able to negotiate a reduced debt for you. Even if they do negotiate a reduced debt, your credit still takes a significant hit, because you did not pay on your bills for all that time and also because your report will say that your debt was charged off, rather than paid in full.

You Can Negotiate Reduced Debt With Creditors on Your Own

Not all debt settlement companies are rip-offs, but why pay someone something that you can potentially do for yourself? Many creditors are increasingly willing to negotiate with individual debtors.

Bankruptcy Provides Protection and Fresh Start

You may want to consider is filing for bankruptcy protection if you cannot seem to get out from under your debt burden. By law, bankruptcy puts an immediate stop to creditor harassment, efforts to collect and debts you owe, repossession, and foreclosure actions.

If you qualify for a Chapter 7 bankruptcy, you may be able to eliminate all of your unsecured debt. Alternatively, Chapter 13 will allow you to reorganize your debt into a reasonable, affordable repayment plan paid over the course of three to five years’ time. In a Chapter 13 you do not need to pay 100% of your debts.

Contact an Experienced Debt-Relief Attorney in New Jersey

The law firm of John Hargrave and Associates, in Barrington, New Jersey, can help you make an informed decision about debt consolidation, bankruptcy, or another bankruptcy alternative. To schedule a free initial consultation with an experienced debt-relief attorney, please call (856)-759-6022 or (866)-662-3191. You may also contact us online to schedule your appointment.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.

Located in Barrington, New Jersey John Hargrave & Associates have helped people towards a fresh financial future through bankruptcy for over thirty years. We serve South Jersey, Burlington County, Camden County, and Gloucester County along with Camden, Cherry Hill, Pennsauken, Maple Shade, Lindenwold, Cinnaminson, Collingswood, Haddonfield, Bellmawr, Gloucester City, Marlton, Pine Hill, Audubon, NJ and also Philadelphia, PA. Contact us today to learn more about your options under the current bankruptcy laws. We’re here to help.