Question on Conversion Eligibility?

[andysmom]

If while in a chapter 13, you switch jobs and are now below the median income and you pass the means test, are you able to convert to a chapter 7? If so, what is involved?
We do have a call in to our lawyer as well.
Thanks in advance for any info you may have.

[lrprn]

If while in a chapter 13, you switch jobs and are now below the median income and you pass the means test, are you able to convert to a chapter 7?

If your lawyer runs the Means Test and it shows you don't have sufficient disposable income to support a 13, then yes, your lawyer can convert your case to Ch 7.

Keep in mind that if you filed Ch 13 trying to keep secured assets, depending on your circumstances and the circumstances around each asset, one or more of your assets might be at risk if you file Ch 7. For example, you cannot be in arrears on your mortgage or car loan payments when you file Ch 7 and keep the house or car.

We do have a call in to our lawyer as well.

Good to hear. Your own bk lawyer knows your finances well and is the very best person to give you the real picture about what's going to be possible and what isn't possible if your current Ch 13 can be converted to Ch 7. Good luck - hope everything works out in your favor!

[andysmom]

Thanks for your reply!
No, we filed to get rid of all credit card debt & we were over the median by just about $500 or so.
We didn't pass the means test because of a 401k loan.
Mortgage is not/nor ever has been in arreras and we don't have any car loans or any other secured loans. No priority debt or 2nd mortages/helocs.
everything was credit cards.
With getting a new job the loan becomes a early w/drawl fro which we'll have to pay tax & penalty.
New job would be about $1800 under the median income- i ran the mean test on nolo and it said we passed that as well now.
Thanks again & hope our lawyer calls back soon.

BTW- do you know if we can convert or if we'd have to dismiss & refile as a chapter 7?

[lrprn]

BTW- do you know if we can convert or if we'd have to dismiss & refile as a chapter 7?

Depends on your circumstances. Since your primary debt was cc's and you didn't have asset arrears in your filing, given what you've told us it sounds like it's easiest to convert your case rather than dismissing and refiling as a 7. However, your lawyer knows what will be best in your situation. Keep us posted about what your lawyer tells you.

[andysmom]

Unfurtunateley our lawyer believes that it's not a big enough drop in pay to do a conversion. He said usually our trustee/courts want to see a 15% decrease before conversion to a 7 and conversely he said the trustee usually doesn't change the pymt plan higher without your income going at least 15% more.

[Pandora]

why would you want to convert when according to your past postings, you're paying 0% to all unsecureds and have nothing secured, due to your 401K loan? Your payment is what..like $50 a month as it stands and will not increase until the last 5 months of your CH. 13 due to 401K being paid in full.??

IMO I'd leave it alone - you have the lowest plan I've seen yet on here since you had no secured items included in your plan. Either way you'll have to pay the 401K off - and given your entire plan IS your 401K payment... why convert?

[andysmom]

The reason we were thinking about converting is because my husband is thinking about accepting a new job where he'd be making a little less money- which means if he leaves his job- the 401k loan is treated as a distribution & we pay penalty & taxes and now is extra income. The new job offers family medical insurance paid- which we were paying before so that can go in as disposable income- at the same time our expenses have increased w/ extra prescriptions, speech therapy for my son, etc.
Our plan actually called for a 0 pymt because we had negative dmi.
With the 401k loan (about $360 mo) and medical being paid (about $420 mo) I'm afraid it'll make our pymt over $800 a month. With a drop in income plus added medical (prescriptions & speech therapy) of over an additonal $250 mo. and our cars are falling apart. I'm nervous.
Our lawyer said if the trustee tries to change the pymt he can refill out the forms and show our increased expenses to try to work out a new payment plan.