Debtors do not always realize that Chapter 13 bankruptcy offers more ways than Chapter 7 does to preserve their assets, such as vehicles, appliances, and their homes. In some cases, a debtor files for Chapter 7 bankruptcy, only to learn that he or she makes too much money to qualify for this type of bankruptcy, and must convert their bankruptcy to a Chapter 13 bankruptcy in order to avoid dismissal. Conversion from one type of bankruptcy to another can be challenging. It is wise to retain an attorney to make sure that you obtain a full discharge of your dischargeable debts at the end of a Chapter 13 bankruptcy. Alabama bankruptcy lawyer Charles Grainger can represent you in the process of converting a Chapter 7 to a Chapter 13 bankruptcy.
You are supposed to take the means test before filing for Chapter 7 bankruptcy to make sure that you are eligible. However, some debtors are not aware of this requirement, and file their paperwork for a Chapter 7 bankruptcy anyway, only to find earn too high of an income to be eligible. If you are not eligible for Chapter 7, you can either dismiss the case altogether, or you can convert it to a Chapter 13 case under 11 U.S.C. § 706(a).
Similarly, you may not be aware before filing that Chapter 13 provides opportunities to get rid of junior liens, catch up on mortgage arrearages, cram down car loans, and otherwise take care of debts so that you can keep your property. If you can afford to pay back your debts and want to keep your property, you may want to convert your Chapter 7 bankruptcy to a Chapter 13 bankruptcy.
If you file for Chapter 7 bankruptcy, you authorize the trustee to sell any nonexempt assets to pay back creditors. Not everyone understands how this works. If you realize that you do not want to lose the nonexempt property and are willing to repay your unsecured creditors the same amount as the nonexempt property is worth, you may convert your case.
All debtors acting in good faith have one opportunity to convert their bankruptcy from a Chapter 7 case to a Chapter 13 case. You will need to obtain credit counseling and create a debt repayment plan that allows for the repayment of a substantial amount of your debts. You can initiate the process by filing a motion with the court, explaining why you want to convert the case. The court is likely to grant you this opportunity unless you are ineligible or show bad faith. An example of bad faith could include concealment of assets in the Chapter 7 case.
You should be aware that a creditor might oppose your motion to convert. Creditors have argued against motions to convert by arguing that a debtor’s indebtedness is greater than what is allowed under Chapter 13 or by submitting evidence that the effort to convert is in bad faith.
There are a number of situations in which filing for Chapter 13 bankruptcy is more beneficial for a debtor than filing under Chapter 7. The ability to keep your assets is far greater in a Chapter 13 bankruptcy. At Grainger Legal Services, Alabama bankruptcy attorney Charles Grainger can counsel you on whether it may be appropriate to convert your Chapter 7 bankruptcy to Chapter 13. We have offices in Prattville, Montgomery, and Troy. Call us at (334) 260-0500 or contact us online to schedule a free consultation with a skilled debt relief attorney.