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Converted Chapter 7 case from a 13...payments question

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  • Converted Chapter 7 case from a 13...payments question


    I filed this week to convert our chapter 13 case to a 7. We paid 22 payments into the chapter 13 case, and because of the death of my spouse, I just can't do it anymore.

    My question is how do they account for the chapter 13 payments, if the switch to Chapter 7 goes all the way back to January of 2016 when we initially filed? Is there some sort of a credit we get against the non-exempt property?

    Thank you for your feedback!

  • #2
    Very sad to read the news about your loss and my heartfelt sympathies to you and your family. For a conversion, the case will always be dated as of the date you filed the original case. The Chapter 7 Trustee can look again at assets, but they can only include the value of the assets as of the filing date (I went through this as well). Unless there was some significant non-exempt property to start, the Chapter 7 Trustee isn't going to do much digging around.

    For example, you had $2,000 of non-exempt equity during the Chapter 13, but paid, based on your DMI, over $2,000 to the unsecured creditors during the time in the Chapter 13. The Chapter 7 Trustee can't use that because you already paid the "Chapter 7 liquidation" value to the unsecured creditors. Additionally, if the property improved in value and you gained more equity, the Chapter 7 Trustee can't go after that new equity that you accrued since the filing of the Chapter 13.

    Hopefully your attorney will go through all this with you and make the transition easy. I converted after 22 months as well and it was incredibly smooth.
    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.


    • #3
      Thank you - justbroke - you really put my mind at ease. We were break even on the house at the time of original filing and only had $100 in equity as exempt on our original schedule. Now, 22 months later, the house value has gone up, while the mortgage continued to go down. Being that we paid $50k into our chapter 13 plan, we far exceed the "Chapter 7 liquidation" value to the unsecured creditors. The only thing keeping us in 13 was the means test, as my husband made 70% of our income.


      • #4
        Justbroke, do you know if the local rules can change what you said above about the value of the asset? The reason I ask is that my lawyer asked the current sales value of my home.

        Thank you in advance.


        • #5
          Originally posted by dead13 View Post
          Justbroke, do you know if the local rules can change what you said above about the value of the asset? The reason I ask is that my lawyer asked the current sales value of my home.
          I don't know what your attorney is thinking, and you may want to ask the attorney about the affect of 11 USC 348 effects of conversion. While I have had this conversion experience, it was in Florida and I'm not an attorney. The rules should be the same in N.J. because Congress modified 11 USC 348 to specifically deal with this issue.

          Have your attorney look at In re Slack, 290 B.R. 282 (Bankr. D. N.J. 2003), since you're in New Jersey. Ask your attorney why you need a new value since you believe that the value that is already on Schedule A - Real Property when the Chapter 13 was filed.

          In re Slack, 290 B.R. 282 (Bankr. D. N.J. 2003)

          This new section was applied in In re Wegner, 243 B.R. 731 (Bankr.D.Neb.2000). When Ms. Wegner filed a chapter 13 petition her home was worth $42,000.00 and subject to a mortgage of $42,800.00, resulting in no equity. After four years in her chapter 13 case, she converted to chapter 7. At that time the value of her home had increased to $51,500.00 and the mortgage had been reduced to $39,900.00, leaving a difference of $11,600.00 that the trustee sought. The bankruptcy court held that under § 348(f)(1)(A) the residence was property of the chapter 7 estate since Ms. Wegner owned it at the time she filed her chapter 13 petition and still owned it upon conversion to chapter 7. Wegner, at 734. However, under § 348(f)(1)(B) the value was limited to the value as of the petition ($42,000.00). Id. The $9,500.00 appreciation in value belonged to the debtor not the estate. Id. at 735. The secured claim was fixed at the amount allowed in the chapter 13 case reduced by principal payments under the plan pursuant to § 348(f)(1)(B). (i.e., $42,800 — $2,900 = $39,900). Id. The equity resulting from principal reductions on the mortgage could be exempted by the debtor. Id. See also, In re Page, 250 B.R. 465 (Bankr.D.N.H.2000).

          from one of cases here in Florida...

          For the most part, courts have held that scheduled values of a debtor's assets in an original Chapter 13 filing will control upon conversion by the debtor in a Chapter 7 case. Therefore, any post-petition, pre-conversion appreciation in the value of property will not go to unsecured creditors, but to the debtor following conversion to a Chapter 7 case.

          See Warren v. Peterson, 298 B.R. 322 (N.D. Ill. 2003); In re Slack, 290 B.R. 282 (Bankr. D. N.J. 2003); In re Niles , 2006 WL 1431460 (Bankr. D. Ariz.). Cf . In re Jackson, 317 B.R. 511 (Bankr. N.D. Ill. 2004); In re Kuhlman, 254 B.R. 755 (Bankr. N.D. Cal. 2000).
          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.


          • #6
            Thank you! I love this site!


            • #7
              Justbroke, An update on my case. I had my 341 hearing today for my chapter 7 converted from 13. Since my husband was on the original petition and is deceased, the trustee was a bit confused. I had the insight to bring my husbands SS card along with mine, so I presented ID for both of us. He did not ask to see a death certificate, which surprised me. The trustee did ask specific questions about how my husband died, and why there were no heart issues prior to his death. Got VERY specific for the record. I said his Declining health was chalked up as a radiation side effect from cancer treatments. No one checked his heart to determine that he had a mild heart attack 5 years ago at some point during those treatments. By the time it was found, he was in Congestive Heart Failure. He did ask if I could sue anyone for that. I said no, since his death was by another heart attack after triple bypass it was considered one of the risks. (A 3% risk, but still a risk.) My lawyer contends that because the life insurance "vested" more than 180 days from petition it is not included in the bankruptcy estate. It was 319 days . He is sending the trustee backup information to support. Trustee only asked if I still owned the home. Did not care about vehicles or any other assets or debts. Did not even care that we did not have an updated schedule of income and assets, and were using the 2016 petition. (Had to send new schedule I & J that to my lawyer twice - once in October and once in November, and they still are not showing in Pacer.) Once we got through the life insurance and death information, he asked if the chapter 13 trustee had objected to my conversion. My lawyer said no, then I got the standard "Have you ever filed before?" "What did your husband do for a living?" and "What do you do for a living?"

              So the trustee said he wanted to keep the case open for the life insurance information. My lawyer said I did fine, and it was exactly what he thought would happen. So now we wait.


              • #8
                As bad as the entire series has been for you, I think you may find the light at the end of this tunnel. It seems to have gone well.
                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.


                • #9
                  Thank you, I hope so. I am thinking that the chapter 13 trustee would have objected if she thought she might be able to win and continue with the chapter 13. My lawyer is disorganized, but I think he knows what he is talking about.

                  Interesting stat - Only ONE case was in there pro se, everyone else had a lawyer.


                  • #10
                    Status update: My lawyer filed a motion on day 59 requesting that my deceased husband have his financial course requirement prior to discharge waived. The hearing is March 6th. I took my pre-discharge course last fall, and the completion is properly recorded in my case.

                    I have seen other posts about Trustees filing a no asset report, and other items during the 60 days after the 341, but my account has nothing. Just the status "Awaiting Discharge" (for 65 days now). Is this unusual? Just wondering.... Thanks in advance for any insight!


                    • #11
                      You will need to ask your attorney about the reason that your No Asset case has no final report. Maybe the Trustee is thinking there is something from the departed's estate that they can cling to (remember, the entire conversation at the 341 Meeting about "suing" someone?). Or, someone just needs to poke the assigned panel Trustee. I don't know, but your attorney is your best resource to get to the bottom of this.

                      Having wrote that, the lack of a final determination of a "no asset" case and your discharge have nothing to do with each other. You'll receive your discharge as soon as possible after the 60 days have elapsed (and probably not until after the hearing on March 6). The closing of the case may be a little longer because I don't believe that the Trustee has determined if they -- on behalf of the bankruptcy Estate -- want to sue anyone.
                      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.


                      • #12
                        First of all, dead13, I am very sorry for your loss and wish to extend my heartfelt condolences on the passing of your husband. I lost my mother 20 months ago and I miss her every day so I can understand how hard this whole Bk has been since then. (She died 8 months before we started the Chapter 13 process.)

                        I have read all your post and think how difficult such a situation would be for me as I have no income at all aside from my husband's job. At his present job , however ,he has a very high life insurance policy which would leave me more than enough to pay off in full the BK13 (8 times his yearly salary) When this jobs ends, due to a possible layoff or if he is lucky enough to find another job before then, he will probably not be able to obtain such a high amount of coverage.
                        One thing that stands out and concerns me is the trustee daring to ask you whether you could sue any one and justbroke wondering if they are planning to sue to collect money for the Bk? Is this lawful? Can a trustee sue with out the participation of the rightful heir to the proceeds and keep them for the creditors and delay the closing of the case?
                        Last edited by Barbisi; 02-28-2018, 02:54 PM.


                        • #13
                          Let me rephrase this question:does the trustee have the power to sue any one to collect funds for the creditors?


                          • #14
                            Barbisi, if a debtor has a claim against somebody and could sue that person on the date of filing the BK petition, then the trustee can step into the shoes of the debtor and file a lawsuit. In this case, since the potential wrongful death claim arose between the initial filing and the conversion, I don't think the trustee has any right to do anything about the suit because of 11 USC 348. But, I can't think of why the trustee would be so interested if he had not right to the claim.
                            LadyInTheRed is in the black!
                            Filed Chap 13 April 2010. Discharged May 2015.
                            $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!


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