10 Jun Bankruptcy Judge Can Order Conversion from Chapter 13 to Chapter 7
Your decision to file for bankruptcy should involve a great deal of thought and discussion with both your loved ones as well as your legal counsel. Once filed, a bankruptcy carries with it some significant consequences.
First, your credit will be affected if you are bankruptcy for one day, one month, one year, or longer. Credit reports are histories and if you have availed yourself of the bankruptcy system, that fact will become part of your credit history, and as such may negatively affect your credit profile.
Second, you may not always be able to dismiss your bankruptcy case. The Bankruptcy Code specifically disallows a “voluntary” dismissal in a Chapter 7 case. As my colleague Douglas Jacobs wrote on this blog back in May, 2007, “unfortunately, you can’t just file a notice and dismiss the case and everything was as it was before you filed. Once the process has started, you have to get court permission to let you dismiss. Permission will only be granted if there’s a very good reason.”
The Bankruptcy Code does allow for a voluntary dismissal of a Chapter 13, but this authority is not absolute. If the Chapter 13 trustee takes the position that your case was filed mainly to cause delay or that a voluntary dismissal may result in the loss of assets that may otherwise be available to creditors, he can file a Motion to Disallow your voluntary dismissal. I have also seen cases in which a Bankruptcy Judge kept a Chapter 13 case pending so that a mortgage creditor who had obtained relief from the automatic stay could finalize a foreclosure without the threat of a serial bankruptcy filing.
Bankruptcy Judges are well aware that once a debtor’s estate enters into Chapter 7, the Chapter 7 trustee has a great deal of power to administer that estate for the benefit of creditors. Once you avail yourself of the jurisdiction of the court in either a Chapter 7 or Chapter 13, you may find yourself unable to extricate yourself.
Jonathan Ginsberg, Esq.
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