Most people who file Las Vegas bankruptcy choose to file in Chapter 7. It’s usually the best fit for them because they have limited income and lots of unsecured consumer debts. Many others, though, file in Chapter 13, even if they could’ve passed the means test that would have allowed them into Chapter 7. Chapter 13 also offers a discharge at the end of the repayment program, and some creditors get paid off in full, which is beneficial for everyone. However, there are times when you will want to file in Chapter 13 but realize that you’re actually better off in Chapter 7. It’s not too much of a hassle, and it only requires a $25 Notice of Conversion filed with the bankruptcy court. But why would you want to switch chapters? There are many reasons, but here are some.
(1) The most common reason debtors switch to Chapter 7 is that they are having problems making the Chapter 13 payments. If generating the income to make the payments becomes a problem, such as due to losing your job, the trustee will move the bankruptcy court to dismiss your case. This is a good reason to switch to Chapter 7.
(2) Other times, the debtor has problems making mortgage payments specifically. Many debtors choose Chapter 13 because they can use the automatic stay to prevent foreclosure and then get back on track with their payments. If you run into problems, the mortgagee will file a motion for relief from stay and then resume the foreclosure process. At this point, you are unlikely to keep your house, and it’s better to convert to Chapter 7, which will allow you to discharge the deficiency.
(3) You have accumulated unsecured debt since you filed in Chapter 13, especially medical debt, and you wish to discharge it. Converting your case allows you to add subsequent debts to your petition.
(4) The benefits of resolving your bankruptcy sooner outweigh the costs. Three to five years is a long time to be in bankruptcy, and if your plan is particularly difficult, the “light at the end of the tunnel” can be quite distant indeed. Losing your house in Chapter 7 might be preferable to a protracted repayment plan.
Chapter 13 provides many opportunities for those who have the income to make the payments to escape their hardship problems. It has its drawbacks too, and your experienced Las Vegas bankruptcy lawyer will carefully go through your options with you to ensure that your debt is handled in the best possible way.
For more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.