When you and your Houston Bankruptcy Attorney file for Chapter 13 in Texas, you submit a Chapter 13 repayment plan. This financial reorganization plan takes into account how much excess income you earn every month that can be paid to creditors. The Chapter 13 repayment plan lasts anywhere from 3 to 5 years, which is enough time for finances to change dramatically. So how does one deal with changes in income during Chapter 13? One answer may lie in converting Chapter 13 bankruptcy to Chapter 7.
Reasons for Chapter 13 to Chapter 7 Conversions
Chapter 7 bankruptcy in Texas, also referred to as liquidation bankruptcy, is often utilized as a debt elimination tool for individuals who don’t have a great deal of property or income. It allows the debtor to discharge debts much quicker in exchange for giving up any nonexempt property. The most common reasons that warrant a conversation to Chapter 7 bankruptcy include an inability to make Chapter 13 payments regularly due to a loss in income or job or if they are ready to give up property initially protected in Chapter 13 bankruptcy. Because of the potential for losing a home or car, it’s important to discuss your exemptions with your Houston bankruptcy lawyer before converting.
Chapter 13 to Chapter 7 Eligibility
If your financial circumstances have changed and your Houston bankruptcy attorney agrees that Chapter 7 bankruptcy would be a better fit to your current situation, you still must qualify for Chapter 7 bankruptcy to convert. Qualifying for Chapter 7 bankruptcy is accomplished by taking the means test, although in some US Bankruptcy Court jurisdictions this may not be the case, so you’ll want to consult with your bankruptcy attorney on this. If you do qualify in your bankruptcy district for Chapter 7, you will be able to convert your case, however in order to obtain a discharge at the conclusion of the 4-6 month bankruptcy case, you must not have received a Chapter 13 discharge for the previous six years or a Chapter 7 discharge for the last eight years.
Contact a Houston Bankruptcy Attorney
Life situations change, and this is a simple fact of life. Congress understood this when designing the US bankruptcy code, and thus allowed for the conversation of Chapter 13 bankruptcy to Chapter 7. If you are currently struggling to make your Chapter 13 payments on time, every month, contact your Houston bankruptcy attorney to ask them what a conversion would mean to you and if it is in your best interest.