Tax Time is Just around the corner. Time to.....Convert from 13 to 7?
Many cases begin as chapter 13 cases, but end as chapter 7 cases. Changing a Chapter 13 case to a Chapter 7 case is called "conversion".
Why might someone want to convert from 13 to 7?
1. The payments are too high. Sometimes people try Chapter 13 with high hopes, but the necessary, but the payment is just too much.
2. Their life has changed...job loss or disability can happen to anyone
2. Chapter 13 is too restrictive
4. The reason(s) that they filed 13 no longer apply - For instance, if they filed to save a vehicle, but the vehicle is now totaled.
Are there any downsides conversion?
1. You have to be eligible for chapter 7.
2. There are new attorneys fees. If the attorney did not get paid very much in the chapter 13 then the fee to convert may actually be higher than filing a chapter 7 from scratch!
3. Even though the balance owed to a secured creditor might be $0.00 in Chapter 13, when the case is converted to chapter 7 there can be a balance owed on the collateral because the creditor is no longer bound by the chapter 13 plan
4. Though rare, some car lenders will not work out a deal on allowing you to keep your car if you convert. While they basically get no say in Chapter 13, they have the final say in whether or not they will reaffirm in chapter 7
5. You may lose property that was otherwise protected in Chapter 13.
6. If there are still mortgage arrears to be paid in your chapter 13 plan then your house might be in danger.