Chapter 13 to Chapter 7 question

[boye72]

I file Chapter 13 in August of 2005. It's a 5 year plan. I filed 13 because I was behind on mortgage payments and didn't want to give up our house. The past due payments are complete on the mortgage, but our cars are in the plan. One is crammed down with interest added, and the other is no interest payment. Is it possible to convert to a chapter 7 and reaffirm the car with no interest (give back the carmmed down car). I wasn't sure if that was possible since there has been 2 1/2 years of payments with no interest. We have had over $3000 medical bills and are having a hard time keeping up with payments. I know I need to contact the attorney for my specific case, but we're not sure if this is what we want to do and just wanted any information before we discussed it further. Thanks for any help.

[momofthree]

You only have another 5 months of payments, right? Won't the cars be paid off by then? (I ask because mine were required to be paid off in the plan) What good would it do to surrender it 5 months before payoff?

[boye72]

Oops. I mean 2007. I was thinking about the year of the van (it's a 2005). We have 2 1/2 years left on the plan.

[olivies]

Is it possible to convert to a chapter 7 and reaffirm the car with no interest (give back the carmmed down car). I wasn't sure if that was possible since there has been 2 1/2 years of payments with no interest.

I'm a bit lost. Do you want to reaffirm the vehicle loan in a chapter 7, or do you want to give the vehicle back? Also, are you sure your vehicle loan is no interest, even if included in the plan? I am aware sometimes the interest rate is adjusted in a ch13 plan, but adjusted to zero?

[boye72]

We have two vehicles paid through the plan. We would like to give one back and keep the other (it is used for my work) since those are the only two creditors being paid now. I have credit cards that are left, but no payment to them but I understand that without keeping the chapter 13 or converting to a chapter 7, we would have to resume paying them, probably with interest and fees added. On my court documents it says 0% interest paid to that creditor.

[lrprn]

If you dismiss now that you're halfway through your plan, realize that all of your unsecured creditors - not just the ones who filed claims - will resurrect what you owe them as well. All of them will pile on late fees and interest charges that reach back the last 2 1/2 years. It's going to be a huge increase in what you owe.

Also keep in mind that if you dismiss your 13 and then find you can't pay off the debt as you hope, you can't file Ch 13 again for at least six months after the dismissal. You'll also have to repay the lawyer's retainer and filing fee and start repaying on the unsecured debt you've already paid into this plan too.

Are you *really* sure you want to throw away your only protection from that crush of debt when hanging in there for 2 1/2 more years or converting to Ch 7 (if you qualify) gives you a true fresh financial start where you have no unsecured debt at all? If you do qualify to convert to Ch 7, why are you not pursuing that option instead?

[SMinGA]

Lrprn, he didn't ask about dismissing. He asked about converting and how that would affect the vehicle loan he wants to keep.

One problem I see: vehicles paid in a ch. 13 are done so based on the trustee's schedule. The original loan agreement may not be considered current if you convert, and if that is the situation you would probably need to bring it current in order to keep it. (Current according to the original loan terms.)

Would also depend on changes to income/expenses, as to whether or not you'd be eligible to convert to ch. 7.