Could I be way off base about chapter 13 conversion?

[teddybeardj]

I actually am embarrassed to ask this question. You would think I could learn from one mistake, but went and made it again.

My wife and I had debt in 2005. We were concerned about changes in the BK Law that were coming, so we filed chapter 7 before any of the reforms came to be.

Since then my first mistake was accepting a credit card from Capital Murder, aka Capital One, but they end up murdering your financial future..
Anyway, after a series of trying to surf cards and totally doing the same crap again, we ended up back in debt five years after filing. We were doing great with the credit cards and we had nice low interest rates. That is until Uncle Obama jacked with the CC laws and they ALL doubled our fixed rates to high variable rates with promises to raise them on a timely basis.

We ended up filing Chapter 13 a month ago. We are four days away from our 341 meeting. Our attorney fouled up or schedule i and j, the income and expenses sheets. He has our income at over $600 net higher then we really get. In the end I had to correct both schedules and it comes down to if we have the expenses we've been giving up for credit cards, we have about $50 disposable income, vs the $250 he reported we have.

My question is this. If we convert our 3 year plan to a 5 year plan to get the payments lowered, can we then convert it to a chapter 7 when we are eligible? If you can only file chapter 7 every eight years, assuming that's eight years from a previous file date, we would be eligible to convert in two years, seven months. In the end our payments would be less then half of the current proposed plan and we would actually be out of it in less then the three years we were proposing.

Can anyone tell me why this could not work? One more thing, we incurred a hospital bill after the filing, so we can't even include that. However when when, or if we can, convert to chapter 7, couldn't that then be included?

Thanks.

[LaurieM]

Why isn't your attorney filing an amended plan at the $50 per month if the original schedules/plan were not correct to get you through to the date when you are eligible to convert to a chapter 7? Also there is the possibility of having monthly payments suspended for a period of time when unusual circumstances occur (like large medical bills). Your attorney can do a motion to suspend plan payments. Some trustees (like the one in our area) will give verbal authority to suspend just one month's payment but anything beyond that requires a motion for court approval.

[despritfreya]

You CANNOT convert your Chapter 13 to the 7 as you were not eligible for a 7 discharge as of the DATE of your Chapter 13 petition. Your conversion date does not change the filing date. Theoretically you could DISMISS your 13 once the 8 years has passed and then, if you qualify, file a new case under Chapter 7.

Des.

[teddybeardj]

You CANNOT convert your Chapter 13 to the 7 as you were not eligible for a 7 discharge as of the DATE of your Chapter 13 petition. Your conversion date does not change the filing date. Theoretically you could DISMISS your 13 once the 8 years has passed and then, if you qualify, file a new case under Chapter 7.

Des.

Thank you Des...

My attorney eluded to the notion of not attending the 341 hearing. He said that it will come up a month later and then not attend that hearing either. Then the court would dismiss. We would then re-file and include the new medical bill as a creditor.
But he hasn't given me word about my question. I do remember in our consultation he mentioned that when we were eligible for chapter 7 we could convert, but said no since we would be in a three year plan and couldn't convert for three years anyway, what would be the difference, which he agreed. That's why I thought of making lower payments on a five year plan and converting it at the date that marks our eight years since the previous filing date.

Its a good thing there are the professionals that can help us through. That's two bits of something I would have done wrong if I had tried this on my own..

[momofthree]

Most of the time, the payment amount will be the same whether you are on a 3-year or a 5-year plan. You have to commit 100% of your DMI each month regardless of the length of the plan. There are a couple of exceptions though:

1. If you are paying back 100% of your debt, some districts will allow you to simply spread that amount out over the 5-year term. Other districts make you contribute the full amount of DMI and pay the plan off sooner.

2. If you are in a negative or low-DMI situation where you have a minimum that you have to pay into the plan (due to mortgage arrears, non-exempt assets, IRS debt, etc.), then you can spread that out over 5 years to make the payment manageable.

As to whether you can convert, Des already covered it. When you convert, it uses the original filing date, so if you don't qualify for 7 on the date of filing due to a prior bk, you won't qualify to convert that case at any point in the future. But you could dismiss your ch.13 and re-file a ch.7. You would have 3 bankruptcies on your credit for a couple of years if you go that route, as the first case won't drop off your report for 10 years, even though you can re-file after 8.