Converting Chapter 13 to Chapter 7

[appleae]

If we can no longer make our chapter 13 payment, I am told that we can convert to a chapter 7. Is it really accurate that our case is "converted" or is it really that the chapter 13 plan must be dismissed by the trustee first and then we must refile as chapter 7.

Is there a waiting period between chapter 13 and refiling as chapter 7?

[justbroke]

I've just done this. While you could have, and I have seen Chapter 13 cases dismissed and then refiled as a Chapter 7, it's easier to just convert the case. The converted case has the same exact case number, all the documents filed in the Chapter 13 are considered "already filed" in the Chapter 7, and life goes on. Same judge, just new Trustee assigned.

I think conversion is cleaner, but some cases require -- because of the lookback and maybe some other issues -- a dismissal and then refile over a straight conversion. Usually, if the case needs a dismissal and refile, the attorney works it out with the Trustee so that the case is dismissed without prejudice so the refile can be immediately done.

[mrslick]

i'm in the same boat

I've just done this. While you could have, and I have seen Chapter 13 cases dismissed and then refiled as a Chapter 7, it's easier to just convert the case. The converted case has the same exact case number, all the documents filed in the Chapter 13 are considered "already filed" in the Chapter 7, and life goes on. Same judge, just new Trustee assigned.

I think conversion is cleaner, but some cases require -- because of the lookback and maybe some other issues -- a dismissal and then refile over a straight conversion. Usually, if the case needs a dismissal and refile, the attorney works it out with the Trustee so that the case is dismissed without prejudice so the refile can be immediately done.

justbroke, you're very knowledgable. I filed ch. 13 Nov. 16 last year because of 1099C from foreclosured properties, as well as between me and my wife we make $110k. to give a little bit more info, we have about $30k in cc, $35k in student loans, we have about $15k-$25k equity in our current home and have no 2nd mortgage. our plan was confirmed on 01/25/10 but the trustee change the payment from $352 to $786/month. she said that we have to be able to pay at least 21% of all unsecured debt.

My problems are:
old cars are giving us major problems like need of a new engine problem in one of them. I've already spent $2k in repair this year and more repairs are needed. So i need to get a new car which will requires to look for a car loan. i know the trustee would have to approve it and that will lower our payment.

this the most IMPORTANT thing. we're expecting our first child June 13th. i started to look around for infant care and what found sa far is infant care will cost around $350/wk. we have no one to leave the baby with and my wife only gets 1 month pay maternity leave and she makes about $65k/yr. so my question is when should i start talking to my lawyer about converting to a ch 7? i don't want to lose my home, i'm only behind about 2.5 months. i can find a way to come up with that money if i have to. i don't have any other assets other than the house.

Please advice. thanks

[penniless]

The big key is your income has to be near or below the median to convert to Chapter 7 otherwise you will have to stop paying, get it dismissed and file when your income is under the median. I had my 13 dismissed in November and just filed a 7 last week.

[justbroke]

this the most IMPORTANT thing. we're expecting our first child June 13th.... so my question is when should i start talking to my lawyer about converting to a ch 7?

I would be talking to your Chapter 13 attorney now. You can do some pre-planning and decide how you need to go about this. Expecting a new family member is no small task. I myself underestimated what getting married and having 2 new stepchildren would do to my life... and it is indeed a change to have children.

Your attorney may even be able to suspend payments for a few months while you get situated and then file the conversion. This will cost you additional attorney fees, but planning now... you may be able to save a little as well.

Congratulations!

[mrslick]

The big key is your income has to be near or below the median to convert to Chapter 7 otherwise you will have to stop paying, get it dismissed and file when your income is under the median. I had my 13 dismissed in November and just filed a 7 last week.

penniless, so what you're saying is that i will not be able to convert unless my wife or myselft quit our job to stay home with the baby then file for 7? i thought if your neccesary expenses exceed your income and if your unsecured debt is below $336k you should be able to file ch. 7.

[mrslick]

I would be talking to your Chapter 13 attorney now. You can do some pre-planning and decide how you need to go about this. Expecting a new family member is no small task. I myself underestimated what getting married and having 2 new stepchildren would do to my life... and it is indeed a change to have children.

Your attorney may even be able to suspend payments for a few months while you get situated and then file the conversion. This will cost you additional attorney fees, but planning now... you may be able to save a little as well.

Congratulations!

thank you and congratulation to you as well.

base on what you said i should be able to convert soon after the baby is born? do you think it will be a problem because our income is above the median? Penniless mentioned something about our income has to be near or below the median income level in other for me to convert. I don't think that should be the case, filing bankruptcy is suppose to be a fresh start. if we can't convert to 7 because of our income, one of us has to quit our job to care for the baby then our income will be below, but i don't think that's what the law meant to do when it was written.

[penniless]

I tried to convert and it didn't work. I could have been hosed by my attorney, but I doubt it. The 6 month period is huge or your 13 will get adjusted down. I had to wait for my wifes income to fall off before we could file the 7.

Maybe someone who has had success converting will chime in.

[hope2retire]

I converted when my income dropped. I lucked out an got an excellent lawyer and the conversion was her idea. I had my first 341 for the chapter 13 and about a month later had to go to court where my attorney told me she was going to try to convert me. The judge gave her 30 days to get all the appropriate papers in. Dec 09 I had a new 341 for the C7, had to go back a second time with new paystubs and had to have everything audited. Once the auditor was satified the trustee was happy and I was discharged the end of Feb. 10 and closed 10 days after that. Part of my payments to my attorney were in my C13 payments so those I had to pay up front but I also got the money back I had sent to the C13 trustee. It was the most stressful few months of my life, sometimes I would just sit an cry but now it's like a big cloud has been lifted from my life.

[olivies]

We are in this situation now. Our attorney has been unhelpful to say the least, and we have been begging to modify the plan but we have come to realize she either doesn't care to actually work for her clients or is too busy. A second attorney we met with asked us for some numbers, things that weren't accounted for on our initial means test (difference between IRS allowed rent and our actual rent, increased federal witholding from hubby's paycheck, increase in educational expenses, and I had no clue I could include "babysitting" and other childcare expenses as such and thought 'well, I don't use daycare so I guess I put "zero"). We got no guidance on any of it, and this forum has been illuminating!

So the second attorney says it appears we can file for a 7 and we have 2 options: convert or dismiss and immediately refile a 7 (which is starting from scratch, new means test, new schedules, etc.). If we dismiss it ourselves we do not have to wait 6 mos to refile a 7. He said converting it could raise objections from the UST, they may argue to not allow a new means test, etc. So it looks like dismissing and refiling is the way we will go. Now, we'll be giving up our vehicle since reaffirming it is not in our best interests and I don't have $$ around to redeem it, but in the end it will all work out.

[mrslick]

We are in this situation now. Our attorney has been unhelpful to say the least, and we have been begging to modify the plan but we have come to realize she either doesn't care to actually work for her clients or is too busy. A second attorney we met with asked us for some numbers, things that weren't accounted for on our initial means test (difference between IRS allowed rent and our actual rent, increased federal witholding from hubby's paycheck, increase in educational expenses, and I had no clue I could include "babysitting" and other childcare expenses as such and thought 'well, I don't use daycare so I guess I put "zero"). We got no guidance on any of it, and this forum has been illuminating!

So the second attorney says it appears we can file for a 7 and we have 2 options: convert or dismiss and immediately refile a 7 (which is starting from scratch, new means test, new schedules, etc.). If we dismiss it ourselves we do not have to wait 6 mos to refile a 7. He said converting it could raise objections from the UST, they may argue to not allow a new means test, etc. So it looks like dismissing and refiling is the way we will go. Now, we'll be giving up our vehicle since reaffirming it is not in our best interests and I don't have $$ around to redeem it, but in the end it will all work out.

Olivies, is your income above the median level and are both you and your husband working?

[olivies]

Olivies, is your income above the median level and are both you and your husband working?

We are above median income, family of 8, I am a SAHM. Our expenses are what's going to qualify us for chapter 7. You do not have to be below median income to qualify for 7.

[mrslick]

thank you Olivies for sharing. so i won't have to quit my job to care for the baby in order for me to qualify for ch7 afterall. with my current payment plan there's no way i'll be able to pay for infant care. did you had to pay at %21 of all of your unsesured debts?

[olivies]

No, our trustee doesn't have a minimum percentage we have to pay to unsecured creditors. It's based on your disposable income. Ours ch13 plan was set to pay unsecured at 17%. Good luck- I definitely think having a child qualifies as a substantial change to financial circumstances!

[mrslick]

hello everyone,
i need your valued opinions and experiences. I'm still paying $786/month to the trustee even though my expenses went through the roof with my daughter being borned in June and my Wife income reduced by 40% while she's in maternity leave. My lawyer is pretty good at getting back to me whenever i have questions. We've been trying to convert to ch 7 but the Trustee refuse to let us convert because we are a couple of months behind on our mortgage payment. The Trustee is saying that we have to do a loan modification before we can try to convert. I told my attorney that i can get the money from relatives to catch up on my mortgage, but the trustee won't allow that. Our disposable monthly income (DMI) was not even $786 to begin with, the Trustee said we had to pay at least 21% of all our debt. So now our DMI is more like -$1500 if we have to pay for day care. I've tapped into the money people gave to my Daughter to pay the plan this month. to cut this short, i started the modification process in June with BofA and i was told that it could take more than 3 months to have a Negotiator assign to my case. I will not be able to make the plan payment during that waiting period, so my thought process was to request a dismissal and refile once the modification is finish. Oh, here's the kicker BofA told me we're pretty much wasting our time with the mod because we make too much money. the Rep told me that unless my Wife stop working or go part time we will not qualify to any modification program they have. So now my Wife is going back to work part time and hoping that we can get the loan mod and at the same time our income will be close to the median and hopefully that enable to us to convert.

My questions are:
1. do you think i should request the dismissal?
2. Do you think my Trustee is just being to impossible so that she can keep collecting her 10%? Should i start the convertion paperwork now hoping that the loan mod will come through?
3. is the Trustee the one who approve the conversion or the Judge?