Converting to a 7?

[BillyRip]

I have a friend (yes friend, my BK7 is completed) who is in a 13 with payments of $350 a mo. for 5 yrs. The majority of that is to the IRS.

I am thinking she should be able to convert the 13 to a 7 even though it tax debt and then pay the IRS outside of the Trustee.


She is being laid off in 60 days. she can either take 20 weeks pay in a lump sum, or she can stream it for 20 weeks like a pay check. She grosses about $1000 a week. If she takes the lump sum, the IRS would hold 33% by law.

Which would most easily get her into a 7? Thoughts? Am I way off here? Thank you!

[justbroke]

How long have they been in a Chapter 13?

If she is that close to a discharge, it's easier to finish the Chapter 13. If a Chapter 13 dismisses or is converted, all the interest, penalties and fees that have would have accrued over the life of the Chapter 13, come back with a vengeance?

Without specific information on time in the Chapter 13, how much the priority and general portions of the tax arrears were, and other factors, I don't think anyone can make a simple guess. It's a financial decision and you really need to read the numbers. You can almost always seek a forbearance in a Chapter 13 while you look for new work. Perhaps, unemployment could bridge the time. These are all factors that must be considered.

Additionally, most Districts won't let you "immediately" convert because you anticipate losing employment. The event usually must have occurred and then some forbearance period must have elapsed.

[BillyRip]

Only been in a few months. At least 48 mos away from discharge.

The layoff will have in 60 days. No stopping it.

[justbroke]

Conversion is more than likely the right thing. If there are any secured debts, like a home or car, those will be issues to deal with. The IRS allows individuals to setup a payment online through their Online Payment Agreement (OPA) application. You can actually spread out most past-due tax obligations to 60 months. The tax debt is subject to acrruing interest at a rate of 4% (as of today).

[BillyRip]

Thanks JB!