Conversion is the process in which you change from one chapter of bankruptcy to another. In this part of my blog series, I'll go through converting from a Confirmed (or unconfirmed) Chapter 13 to a Chapter 7.
The most important part of this process, is to first verify that you are actually eligible for a Chapter 7. This is important because you make this statement on the Notice of Conversion. While Conversion is an absolute right, you actually have to be qualified under the Chapter 7 guidelines in order to Convert.
Next, you really need to check your local rules on what you need to file upon Conversion. Most Districts require a new Means Test to be completed. However, this means test is on a different form than the Chapter 13 means test (Form B22C). For a Chapter 7, you fill out the Chapter 7 means test which is on Form B22A. This will also give you a good indication as to whether your case is an abuse or not.
Important Reminder #1: everything you put on your Means Test is as of the date you filed the original case! This means, that if you suffered a loss of employment, the Means Test (Form B22A) will still show you being abusive because it would be based on your income at the time of filing, not at the time of conversion.
In cases where there is loss of employment, it is probably best to work with the Trustee to get your case dismissed without prejudice, and then to file a new case! This will cut down on any adversity from the United States Trustee (UST) who you really don't want to get on the bad side of!
So, if you have completed form B22A and you qualify -- that is you are not over $109.58 or $182.50 in disposable income -- then you can continue.
Next, you will complete a Statement of Intentions. On that statement, you indicate what you will be doing with secured property. What you do with secured property will be very very important and is why you probably should have hired an attorney anyway. (Note: I will go through how to deal with property, reaffirmations, redemption and surrender in a different blog.)
Important Reminder #2: Most people go into Chapter 13, when they otherwise qualify for chapter 7, because they have arrears -- or past due payments -- on secured property. Dealing with property when you were in arrears prior to converting your case to a Chapter 7 is extremely important. So important, that I will discuss it in a different blog!
Now that you have your Statement of Intentions done, you get to do something that no one else can. You can now update your schedules to include any debt that was incurred up to the time of conversion! That's right... you can include anything by filing amended schedules to include any new debt since filing (and even before filing if you forgot something). This is extremely important from a strategic standpoint. Again, I won't discuss strategy in this particular blog, so look for my blog on conversion strategy later.
Once you have everything packaged, make sure that you file this all together along with the $25 conversion fee. I wouldn't file the amended creditors yet and only file the required forms. Remember, that you have to serve the Statement of intentions on all secured creditors.
As far as new creditors added... I'd wait until the Notice of Conversion is filed and a new Notice of Bankruptcy is issued by the court. Then I would file the amended schedules (with the new creditors).
Important Reminder #3: Don't forget to serve the Notice of Bankruptcy on all new creditors. You will also need to file a certificate of service stating as much. If you don't, you'll get a deficiency notice and the creditors could claim they were never notified due to insufficient service!
Please know that you will need to include $26 with this amendment, so make sure you get it right the first time.
Please make sure you follow local rules because some Districts require a new Matrix and others will just key off the amendments if there are fewer than 5.Important Reminder #4: You need to file a Motion to Vacate Wage Deduction Order immediately! If you are under wage deduction, this Motion should be filed right along with your Notice of Conversion! Do not do what I did... and that is "expect" the Trustee to do it. They will not and you'll have your pay garnished forever! Seriously!
Please note that this blog does not deal with people who have previously converted, or have any motion for relief from stay or motion to dismiss pending! Converting via "notice" is reserved for debtor's whose case is otherwise in good standing! Otherwise, you have to do this by Motion and the process is slightly different.
The nice thing is, that if you are entitled to convert via notice, your case is converted on the day the Clerk of the Court receives the notice! Unfortunately, not every case is entitled to conversion via notice, so check your local rules.