conversion from 13 to 7 question

[coronaglen]

I was told by an attorney( a friend of mine), not my bk attorney, that if i wanted to convert to a 7 from a 13 I just quit paying the payment. then the court will automtically convert the bk to chapter 7 if i do not file any paperwork. is that true?

i am in california. since i am behind in property tax and only have a year and a half left, there is no way to catch up. but if i wanted to just convert to a 7, just quit paying.

thoughts?

[goon]

I do not know the details of what has to be done to convert but I am almost positive that you have to do more than just stop making payments ( if you just stop making payments your case will be closed, and not in a good way).

Someone that is more familiar will chime in with exactly what needs to be filed, but it is more than just stopping payments.

[Floridagail]

My Soninlw lost his job, so his attorney told him to stop paying and after 60 days the trustee dismissed the case. It did not get converted.
They had to do means test again to qualify for chpr 7.

[frogger]

Thoughts? That if you quit paying, you will be dismissed.

If you want to convert to a 7, get with your attorney and see if you qualify to be converted. If so, then do the paperwork.

[LadyInTheRed]

It's true that if you stop making payments, your Chap 13 will be dismissed and at that point you can file a Chap 7 if you qualify. But, that is not a conversion. It is a whole new case. I have seen posts by people who are advised by their attorney to go the dismissal and refiling route instead of conversion. But, I don't know what would make one strategy preferable over the other. Nobody should let their Chap 13 get dismissed without getting the advice of an experienced BANKRUPTCY attorney. There are consequences to serial filing.

[lillymarlene]

LITR, I sure agree. A couple of years ago, shortly after my 341, I received a report from my trustee that I was in default. My attorney looked it up, and said I had missed a payment. He also said if I would rather do a 7 I could let this case just dismiss and then refile a 7. I quickly sent in the missing payment. I was horrified thinking all that time, $$ and work for nothing and the possibility again of 50+ phone calls per day.

I don't know for sure but I think dismissal (if I wanted to change to the 7 route) was recommended to me since the automobile exemption when I filed was only $750. Then about 3 months later the exemption was increased to $7,000. Would true conversion have to go back to whatever law was in place at the time?

[keepsmiling]

OP, perhaps you should discuss a modification of your plan instead.

[tobee43]

OP, perhaps you should discuss a modification of your plan instead.

i think that is really sound advise as the OP only has a year and a half to go to complete the 13. changes happen all the time, income loss, as an example, and i'm certain they may work with you. it sounds so much better than to start from square one again. a 7 usually takes months to complete and by that time OP would maybe have 8 months left to go to put this all behind them.

[HHM]

LITR, the main reason to go the dismiss and refile is if there are significant post petition (post petition of the 13) debts. A conversion relates back to the filing date of the 13.

To coronaglen, your "friend attorney" has no idea what he or she is talking about.
If you stop paying the 13, the case is dismissed, you back to square one. Your creditors get to go back to the date of filing and add back interest and late fees to the debts listed in the chapter 13.
If something has "substantially" changed and you are struggling with the current chapter 13, you have 3 choices.
1. Modify the existing plan.
2. If you "qualify" move for conversion of the case from 13 to 7, or
3. Let the 13 be dismissed and refile a 7, again, assuming you qualify for 7.

If nothing has changed and (forgive me) you are just grumbling about your chapter 13, you simply stick to it.

Generally, a conversion is better unless there is a strategic reason to dismiss and refile (new debts, etc).

[mylife]

Hi HHM,

We are considering a conversion but are a little reluctant. We are two years into a five year 100% plan. The large items in the plan was mortgage arrears and a crammed down vehicle. Our daughter will be turning one next year and at that time we plan to put her into daycare which will increase our expenses. When I was pregnant we asked about lowering the payments because it was unaffordable wth the mortgage and the atty advised that our payment will not go lower at all. A few months ago we were granted a modification on our mortgage which took care of the arrears which were included in the plan. Our atty said this will reduce the plan time which we're waiting to see by how long. The reluctance with converting are (1) what happens with the crammed down vehicle, will we owe the original amount or crammed (2) we are having our second mortgage stripped and will now have to pay that back or apply for a mod (3) all the money we've paid so far seems to have been in vain. Any advice is greatly appreciated as I'm sure this has been addressed before.

[HHM]

mylife, if you are in a 100% plan, there must be an income issue and so I question the assumption that you qualify for a conversion to a chapter 7. However, assuming you qualify, let me address your other questions which will likely clarify your situation.

1. You will lose the vehicle cram down. If you convert, you will go back to the original amount owed, and to boot, you may be in default since the payments you were paying in the plan may have been lower than the payment contractually due.
2. The 2nd mortgage strip is null. You will go back to having to pay the second mortgage, and again, you will likely be in default since you probably haven't been making payments.
3. When you got the loan modification, did you actually go in and modify your chapter 13 plan to stop the trustee from paying the arrears?

All things considered, you are probably better off in the 13 and probably need to go in and modify the chapter 13.

[mylife]

Hi HHM,

I stand corrected, we are not in a 100% plan and the atty said we can convert when we are ready. I am leaning towards not converting for all the reasons you cited. I'd like to get as much info as I can before our conference call with the atty tomorrow so that I'm not wasting any time and know what to ask.

1 & 2 how will those defaults be cured in the 7?
3. That is in process. We needed court approval for the modification which was just done yesterday. The atty said instead of our payment decreasing the plan term will decrease by a few months.

Modification of the 13 seems logical but the atty said there is no way our payment will be reduced. When we confirmed we had to go to court and go in front of the judge. The atty "scared" us and said we'd be better off agreeing to a payment prior which we did. Now I regret not going in front of the judge who would probably have more mercy because our ttee office is difficult. I guess we can demand the atty prepare a modification and see what happens.

It really does not make sense to me because the mortgage arrears is not appx 7k and the car is appx 7k, after that the other debts are small but they said when we surrender our taxes that does not affect anything as far as the base.

Thank you HHM once again for the information!

[HHM]

1&2, They can't. There is no mechanism to cure the defaults in chapter 7. You can probably deal with the car using a reaffirmation agreement (not advisable, but it is an option). As for the second mortgage, nothing you can do. (definitely don't reaffirm) Now, it may not matter that you are in default of the 2nd. If you were able to do a lien strip, that means the 2nd is entirely underwater. So, the 2nd mortgage is unlikely to foreclose. However, the LIEN stays on the property and you will have to address that lien at some point (most likely with a settlement in the future) if you ever go to sell or refi the house.

3. Not sure how to address your other questions, not really enough info to say. It sounds like there must be some minimum you must pay. However, I am not sure why the payment couldn't go down, if you actually qualify for chapter 7, by BK definition you don't have disposable income, so if you no longer needed to cure arrears, which would reduce the mandatory claims, I don't see why the payment couldn't be reduced.

[coronaglen]

thanks for all the info. i started looking at this as i may have the opportunity to move back east and make more money. the only reason we did 13 was we were going to stay in our house. but it is still under-water. but we are current. i am not paying 100% back. far from it. i don't want to do anything that would make the court review my case as i started making more money. so i am able to get out of the hole tax-wise and set up a payment plan. I was just looking at my options. I read here that if you don't do anything to bring attention to yourself, your payment rarely goes up. i submit my taxes as required. and i dont get refunds. it has been pretty easy so far.

love this forum.

[mylife]

We had a discussion with our atty today and decided to stay in the 13. Since the mortgage arrears are no longer included we are going to modify our plan to take our payments from $850 to approximately $350for the duration. Since our ttee is a jerk we're going to see what happens. We have to submit new schedule I and J. Thanks a bunch again for your feedback!