In a chapter 13 bankruptcy, debtors are able to reorganize their current debt load in order to make their monthly payments feasible. You should consider filing for chapter 13 if you have a steady income but your debts are too much for you to handle. Chapter 13 bankruptcies
allow you to keep all of your assets. You will still have to continue making payments on all of your debts; however, your debt timelines will be extended (typically over a three to five year period).
Sometimes debtors file for chapter 13 only to realize that they cannot even manage their agreed upon payments. If this happens, you should be able to modify
your chapter 13 plan. For example, if part of your reorganization plan involves a monthly car payment - you could surrender your vehicle and your plan payment amount will go down. Of course, this is only possible if you can get by without a car, or if you have another vehicle that you can use.
If there are no effective ways to significantly modify your chapter 13 plan, you still have another option: bankruptcy conversion.
What is bankruptcy conversion?
A bankruptcy conversion equates to changing bankruptcy chapters.
How does a bankruptcy conversion work?
The first step in converting your bankruptcy is to speak with your bankruptcy attorney
. This should always
be your initial reaction whenever making any changes
to your finances if you're currently in bankruptcy. Your NJ bankruptcy attorney will be able to determine whether you will qualify for a chapter 7 or if it would be more beneficial for you to modify your existing chapter 13 plan.
As long as you have not received a chapter 7 discharge within the past eight years, you can "convert" a chapter 13 to a chapter 7 bankruptcy by re-filing some of your bankruptcy forms. You'll be assigned a new trustee, and some of your assets will be sold in order to lower your debt total. At the end of a chapter 7 case, you'll (ideally) be granted a discharge of all or most of your remaining debts that were not paid by liquidating some of your assets.
Will I qualify for chapter 7?
If you already successfully filed for and were granted a chapter 13 reorganization bankruptcy, you should be able to voluntarily switch to a chapter 7 at any time. You and your attorney will have to file a Notice of Voluntary Conversion
with the court.
When a debtor is interested in converting their chapter 13 to a chapter 7, it is typically due to a significant life event that has altered their ability to make their previously agreed-upon payments. These life events include (but are not limited to) things like:
- Job loss
- Natural disaster
If you've experienced one of more of the above situations, converting your chapter 13 bankruptcy to a chapter 7 liquidation bankruptcy makes sense and the bankruptcy court will likely grant you a conversion with no problems.
What if I previously filed for chapter 7 and was denied?
In the event that you have recently filed for chapter 7 but didn't qualify
, you may have to take the NJ Means Test
. If your jurisdiction doesn't require that you pass the Means Test, the court will request a written explanation from you disclosing why you need to convert to a chapter 7.
How much paperwork is involved in converting a chapter 13 into a chapter 7 bankruptcy?
Luckily, you do not have to completely
start over if you want to convert to a chapter 7 bankruptcy. Some forms will
need to be re-filed so that the court has your updated financial information, but your original bankruptcy petition will remain in place.
To learn more about converting from a chapter 13 to a chapter 7 bankruptcy, talk to an experienced New Jersey bankruptcy lawyer
. Your specific case details are important and your attorney will be able to steer you in the direction that will get you to your desired financial destination as quickly as possible.