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If u start w/ ch7, can u always convert to ch13, & if not, why not?

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  • If u start w/ ch7, can u always convert to ch13, & if not, why not?

    have lots (~90k) of credit card debt due to job loss; no assets except home; own home w/ non filing (bk) spouse; little unprotected equity in this property ( less than 2-3k at most); also have a 2nd home w/ 3 indigent siblings on title who are living in the house (w/ kids) w/ about 10k unprotected equity. Different BK attnys advised different things. Some said to try for ch7 and if it does not work out, convert to a Ch13; some said you can lose the house if you open the ch7 door as you do not have an absolute right for a conversion to ch13. thanks for any insight.

    Here is one answer from teh web to this question . I dont get what is meant by 'if you start in 7 the value of the asset will have a larger affect on your payments in 13'...

    'I typically do not try to file a chapter 7 when there is an asset question for a variety of reasons. Among them if you start in 7 the value of the asset will have a larger affect on your payments in 13. If you start in 7, then convert due to asset value you may not be able to dismiss as the chapter 7 trustee will try to force conversion to a chapter 7 so that he can liquidate the asset. Its safest to start in chapter 13 with an experienced attorney so they can set up a fair payment plan that you can afford to make.'

  • #2
    No absolute right to convert 7 to 13:

    Marrama v. Citizens Bank of Massachusetts 549 U.S. 365 (2007) Google and then read it.

    Case if converted it may not be subject to dismissal. Instead it may be reconverted if 13 “fails”:

    11 USC 1307(b) and (c) Google and then read it.

    If you file as 7 and then try to convert:

    1. Must do so before the discharge is entered.
    2. Will have to defend your position if the Chapter 7 trustee objects.
    3. If Trustee objects it is unlikely that you will win your argument.
    4. If you are worried about non exempt property and are not willing to risk the loss of such property do not file a 7.

    Des.

    Comment


    • #3
      thanks for the input and the citation. Here are some questions just so I am clearer ( i have been investigating ch13 , so I am not as up to speed on ch7; )...

      '1. Must do so before the discharge is entered.'

      --discharge of the 7? and discharge means that the debt is discharged?

      Also, When is discharge usually done relative to the filing? In fact, what is the timeline of ch7 events? Is the following the high level steps in a ch7?

      1. debtor filing ; 2. ch7 trustee assignment; 3. ch7 trustee approval/objection of case/filing;

      4a1. for an objection ....> 4a2. debtor/filer response; 4a3. ch7 court adjudication of arguments of debtor and trustee; 4a4. ch7 court discharges debt or tries to get the assets .

      4b1. for an approval ....> 4b2. court discharges the debt , if this is the right term (cha ching; done)


      '2. Will have to defend your position if the Chapter 7 trustee objects.'

      --if the c7 trustee objects to my filing for the 7?

      So are you saying that I would be compelled to defend my position and could not do the conversion to ch13 at this point?

      So you are saying that I cd safely convert to a ch13 only when there is zero objection from the ch7 trustee?


      *******************

      I am curious why three attnys recommended the approach to ' try for a ch7 and convert to 13 if the ch7 attny is intent on seizing the property'

      Here is one attny's answer to the same question on avvo. He says bad faith/fraud wd be the condition to prevent a conversion to 13. How does this square with anyone's knowledge of this?

      'You will be allowed to convert to 13 unless you have filed in bad faith (for ex. concealed assets). But if you are planning to have an option to convert to Chapter 13, you need to make sure you are qualified as a Chapter 13 Debtor. You mention that you lost your job. For Chapter 13, you generally need to have regular income from wages, retirement, or business. If you convert to Chapter 13, but are unable to confirm a Plan, or unable to make your Plan payments, you will be sent back to Chapter 7.
      If the only non-exempt assets are 2 properties with a total of 12K of unprotected equity, unless you have an extremely aggressive bankruptcy trustee, you are likely to have a no-asset Chapter 7. Most trustees will not bother with opening an estate when there is a minimal amount of equity. Have you taken into account the liquidation costs of the properties?
      '

      Comment


      • #4
        These are the bare facts: a Chapter 7 takes on a life of its own once you file. Even if you don't show up for your 341 Meeting or your want to convert, the Trustee can continue to administer the case as a Chapter 7 if it is more beneficial to the creditors (at large). Conversion is an option, from Chapter 7 to Chapter 13, but the Trustee can object to that conversion. This is different than conversion from Chapter 13 to Chapter 7.

        As you are learning, most of this depends if there is something to administer and if the Trustee believes that they can get money for the creditors (and earn a commission). There are many different (panel) Trustees and their aggressiveness can vary greatly... even the same Trustee.
        Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
        Status: (Auto) Discharged and Closed! 5/10
        Visit My BKForum Blog: justbroke's Blog


        I am not an attorney. Any advice provided is not legal advice.

        Comment


        • #5
          'Conversion is an option, from Chapter 7 to Chapter 13, but the Trustee can object to that conversion.'
          --what are acceptable grounds for such objection? The attny from avvo said fraud/bad faith would such grounds.

          My question - IF a ch7 trsutee makes any objection (other than fraud, which I know I am not guilty of) , at that point, can I convert to 13 w/o even doing some sort of defense and continuing in ch7 ?

          yes, there might be 12k of non exempt dough, but the main reason the 3 attnys recommended this is the fact that there are others on title in the two properties and they would wage a lawsuit to stop a sale and argue undue hadship. this of course is a whole other set of contingencies, but one thing wd be true, is that it would be more hassle and $ ( 3-5k is the cost to defend such a lawsuit coming from my spouse and siblinge EACH.. so assuming they do teh lawsuits , which wd be a 100 pct certainty - and both hsoueholds are idigent w/ kids- the max teh trustee wd get wd be 12-6 = 6k opr 12-10=2k ( assumin they win the lawsuits). Lots of headaches for whatever commission they get from 2- 6k , and most ch7 attny dont want such headaches , say thse attnys, but they rcognize that there are aggressive trustees out there in my district of 50 ch7 trustees ( but again, in thier experience most are looking for the big fish), and this case, they said, you can convert.

          yes, I get that if ch13 fails, I'd be back in ch 7 land and wd risk my homes loss. I have spoken w/ around 10 attnys and all said I'd be confirmed.....



          .....assiming my (professionally done and paid for) home evals are accepted .. says this debtor sheepishly


          Comment


          • #6
            The bottom line on this will be your Trustee. You won't know to whom the case will be assigned. Call it luck of the draw. Your valuations may be accepted as-is, or you'll get a (panel) Trustee that likes to find stuff. No one can speculate on this. Attorneys, and even lay people with experience, can only tell you how to adjust your perceptions. You need to know your worse case and what you would do in that situation. In many cases, these are simply not worth fighting.

            You ask about grounds for an objection; you were already informed that fraud and bad faith are the usual objections. Bad faith could be simply that you don't want the Trustee to get the property and you are purposefully manipulating the system (converting to Chapter 13) to avoid a liquidation.

            Once you convert to a Chapter 13 after a Chapter 7 Trustee has objected, you can't go to Chapter 13 and then convert back to Chapter 7. This is specially what is addressed by both bad faith and fraud.
            Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
            Status: (Auto) Discharged and Closed! 5/10
            Visit My BKForum Blog: justbroke's Blog


            I am not an attorney. Any advice provided is not legal advice.

            Comment

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