Individuals who file for Chapter 13 bankruptcy in Texas sometimes find themselves unable to afford the continuing funding of their Chapter 13 reorganization plan. The US Bankruptcy Code was luckily not created in a vacuum and Congress realized that unexpected emergencies such as unforeseen bills, illness, and loss of employment happen. Because of this realization, there are several options to consumers who can no longer afford their Chapter 13 bankruptcy payments, including a modification to your existing bankruptcy plan payments, a hardship discharge, and in some instances, you may be able to convert a Chapter 13 bankruptcy to a Chapter 7 bankruptcy.
Limits on Converting to Chapter 7 Bankruptcy
One can only receive a Chapter 7 discharge every eight years. Therefore, if you have already received a bankruptcy discharge under Chapter 7 from the US Bankruptcy Courts within that time frame it isn’t advisable to convert your bankruptcy case. You must also pass the Chapter 7 “mean test” in order to qualify for Chapter 7 bankruptcy. While Chapter 7 bankruptcy takes less time, you must still follow all the required protocols and steps necessary to receive a Chapter 7 bankruptcy discharge.
How to Convert Your Chapter 13 bankruptcy to a Chapter 7
Before making the decision to convert your Chapter 13 case, make sure you discuss your reasoning with your Houston bankruptcy attorney. They should be able to offer the implications for the change and provide alternatives if the converstio0n isn’t in your best interest. If it makes sense to convert to a Chapter 7 bankruptcy, then you must file a Notice of Conversion with the US Bankruptcy Courts and pay a conversion fee of $25.
After You Convert to Chapter 7 Bankruptcy
Once you convert to a Chapter 7 bankruptcy, you’ll be assigned a new bankruptcy trustee and will need to attend a new 341 meeting of creditors. You may also be required to fill out and submit new forms or amend ones previously submitted, which your bankruptcy attorney in Houston can help you with. The most common forms needing to be changed are the Schedules I and J which outline your current budget.
Help with a Bankruptcy Conversion
Keep in mind that the overall goals for a Chapter 7 bankruptcy are different from a Chapter 13 bankruptcy in Texas. By converting to Chapter 7 bankruptcy protection, you may need to turn over property such as a home that would have been protected under Chapter 13. Because of the differences in objectives, make sure you consult your Houston bankruptcy lawyer before making the move, or if the bankruptcy court has forced you to convert due to mistakes made in filing for Chapter 13 bankruptcy.