DIFFERENCES BETWEEN THE TWO CHAPTERS
Chapter 7 is a liquidation bankruptcy where the debtor receives a discharge of all or most of their debts at the close of an three to four month process. Chapter 13 is a much more extensive bankruptcy where a debtor must complete a three to five year plan and make payments towards all their debts. At the close of the chapter 13 some the debt is discharged and other payments directly secured or priority creditors may continue.
WHY WOULD SOMEONE CONSIDER CONVERTING A CHAPTER 13 TO A CHAPTER 7 ?
Often times people get into a Chapter 13 and things change, income, family size, valuation of the property that secures the debt. These factors can affect the ability to pay a plan payment in a Chapter 13. A case can be dismissed by a trustee if the debtor fails to make plan payments. Debtors are often faced with either taking a voluntary dismissal, or allowing the trustee to dismiss the case (involuntary dismissal), or converting their case to a Chapter 7.
WHY I DO NOT ADVISE A CONVERSION
Converting the case from a Chapter 13 to a Chapter 7 does not change the date of filing. This affects the dischargeability of certain debts. Normally tax debt that is due more than three years from the date of filing and accessed more than 240 days prior to filing, can be discharged in a Chapter 7. For instance, if the debtor has 2006, 2007 tax debt and files Chapter 13 in 2008 and later converts the case to a Chapter 7 in 2010 then the debt tax debt will not be discharged. In such a situation, it is more advisable for the debtor to take a dismissal on the Chapter 13 case and re-file a new Chapter 7 case. Where a previous Chapter 13 case is dismissed the six year bar will not prevent a Chapter 7 filing within 180 days after the dismissal or after.
Maxwell Law Firm represents clients in North Carolina with: bankruptcy court, filing for bankruptcy, chapter 7 bankruptcy, foreclosure defense, chapter 13 bankruptcy representation, and loan modifications. You may schedule your appointment by calling 704-461-1883 or save 25% off the fees and schedule online at http://maxwelllegal.com/consultations. Attorney Chirnese L. Liverpool assists debtors with filing for bankruptcy in California her office can be contacted at 818-714-2200.