Ch 13 to Ch 7 Conversion ... Possible in our *NEW* Scenerio

[snowhawk]

Hey guys and gals,

Well, I am not very knowledgable in the world of bankruptcy as I never thought I would be there. Here is my situation and any advice (I know its the internet and free) will be helpful:

A situation came to my attention that my spouse was spending more than their fair share and now we are in some serious debt. Around 170k in unsecured, 20k in student loans, 4k in one Auto and 25k in another Auto loan plus a VA home loan of about 85k (house is only worth about that as well). We went ahead and filed CH 13 as we were way over the means test for two. We filed in April with a payment plan of 2k/mo. for 60 mo. We had our our trustee court date (341 ?) in May and they objected to some of our expenses, so we have not been confirmed for planned payment yet even though we are paying our proposed plan payment.

The other day my spouse lost her job due to the company scaling back its workforce. So now I want to see if we can convert from 13 to a 7 as I would be able to pass the means on only my salary. However, the lawyer stated well your spouse needs to look for a job and we will review in 6 months and they should have a job by then.

I don't want to wait, I want an end to this now. Is that against the law to try to convert fewer than 6 months out? How do we pay 2k/mo in payment plan when I just lost approx. 3k a month in income? What would I possible lose in the conversion? Are there any gotchas that we want to stay with a 13?

Our lawyer isn't much help and I think he wants us to wait so he can get more money from us. However, we just turned into a turnip and I am fearful of not meeting our regular bills plus the home.

Sorry for all of the questions, my mind is racing with frustration and fear of the unknown.

Thanks for your time and consideration.

[lrprn]

The other day my spouse lost her job due to the company scaling back its workforce. So now I want to see if we can convert from 13 to a 7 as I would be able to pass the means on only my salary. However, the lawyer stated well your spouse needs to look for a job and we will review in 6 months and they should have a job by then.

If all you had to do was lose your job by quitting and be able to convert immediately to a 7, then everyone would be trying that.

The courts and your trustee like to see a long-lasting or permanent reduction in income in order to approve converting your case. At any rate, since your wife just lost her job, my guess is that the six-month lookback will still put you over median until she's unemployed for a few months at least.

I don't want to wait, I want an end to this now.

Patience is often a virtue in situations like this. I understand your feelings, but you need to look at the long-term outcome of what's coming your way after your wife's job loss.

Is that against the law to try to convert fewer than 6 months out?

No, it's not against the law. But as I said before, if all filers had to do was quit a job and be able to immediately convert, then that would be what everyone did.

How do we pay 2k/mo in payment plan when I just lost approx. 3k a month in income?

Your lawyer contacts your trustee and explains the job loss. Unless your trustee is a complete jerk, often they will allow skipping a payment or two while your wife looks for employment.

What would I possible lose in the conversion? Are there any gotchas that we want to stay with a 13?

You can lose any assets or other personal belongings that cannot be completely protected by your state bk exemptions. However, to stay with the 13 you need sufficient income to support the plan, even an amended one.

Our lawyer isn't much help and I think he wants us to wait so he can get more money from us. However, we just turned into a turnip and I am fearful of not meeting our regular bills plus the home.

In this case, your lawyer is not trying to get paid more. If you convert, he'll get paid to convert your case and file your Ch 7 anyway. Rather, your lawyer understands that your trustee will not allow the conversion unless your wife's lack of employment cannot be remedied after at least a few months of job-searching.

You can't convert immediately, so turn all that frustration into helping your wife find another job. If she ends up with a job that doesn't pay enough to maintain your monthly 13 payments, then your lawyer can file an amended plan that reflects her lower income. If she can't find a job at all after several months, then you can consider heading down the Ch 7 conversion path once the six month lookback drops your combined income from all sources below the median income.

[justbroke]

I'm not even going to say much more than lrprn summarizes this very well! In many Chapter 13 cases, where a debtor or joint-debtor loses employment, the first thing your Attorney does is ask for 90 day suspension of plan payments. This is usually followed by a motion to modify the confirmed plan.

If you can work this through and find new employment in the 90 days, prefect. If not, then the next is to see if a long-term plan modification will work. If that won't work, then it's time to convert.