I Am In A Chapter 13–Can I Convert To A Chapter 7, I Don’t Like Chapter 13

31 Jul I Am In A Chapter 13–Can I Convert To A Chapter 7, I Don’t Like Chapter 13

A chapter 13 bankruptcy is often viewed as a repayment or reorganization plan, while a Chapter 7 bankruptcy is called a liquidation. In a Chapter 13, priority debts (back taxes, child/spousal support) are usually paid in full, followed by short-term secured debt (cars, arrearages on mortgages, property taxes, etc.) being paid, and then, if the Debtor’s income allows, payment on unsecured general debt begins (personal loans, medical bills, credit cards, etc.). A chapter 13 typically lasts at least 36 months and must be finished within 60 months (there are exceptions to the 36-month length).

What if a debtor starts as a Chapter 13 case and then finds that the payments are too difficult or that the requirements of the 13 are too hard? Whether a conversion is possible depends on the individual debtor’s circumstances. The conversion might be objected to, if the conversion is being done in “bad faith”. Bad faith is a legal term but not a good term to have applied to a bankruptcy case. If a judge finds that the conversion is in bad faith, he can deny the conversion and order the debtor to continue in the Chapter 13.

My colleague, Nicholas Ortiz, an Massachusetts Bankruptcy Attorney, discussed the issue of bad faith when applied to chapter 13 payments back in 2008. My friend, Michael Doan, a California bankruptcy attorney, discussed the issue of bad faith as applied to the bankruptcy estate when a conversion happens.

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I'm a consumer protection lawyer in Oregon, working with people in Klamath; Lake; Jackson; Josephine; Curry; and Deschutes County. I speak regularly on bankruptcy and consumer protection issues nationwide.
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