Converting CH13 to CH7

[Richardsonms]

I am a little confused. We have our confirmation hearing for our 13 on 9/23. Two weeks ago my wife lost her job and there is no way we can afford the payment. We contacted our lawyer and they sent us a payment reduction. However, I don't think we can afford that either. I contacted our lawyer again to tell him we wanted to convert. He said we should be able to do it, but we would be on the hook for the equity in our two cars minus our wildcard exemption. That ends up being about 14,000. I guess what I don't understand is the process of converting. If we have to re-file, then aren't they still going to take into consideration the last 6 months of income? How long would my wife have to be unemployed to get this conversion done? When is that 14K due? ould we pull money out of her 401K when we move it and pay that 14K? Man, I just have so many questions.

[despritfreya]

It sounds like you filed a 13 not because you did not qualify for a 7 but because you have non-exempt value in vehicles (maybe other property as well) to the tune of $14,000.00. In a 13 you get to keep the non-exempt assets so long as you pay the value of those assets to your unsecured creditors over the life of the Plan. If you convert (or dismiss the 13 and file a new case as a 7), the 7 Trustee will take away the assets, sell them to the highest bidder and give you cash to match your allowed exemption. You may be able to get the Trustee to allow you to purchase the non-exempt value back but you will have to act quickly. Depending upon how the Trustee deals with these issues he may feel compelled to auction the assets and you are free to bid just like anyone else.

If you were below median income or, if above median income had basically "negative disposable income" (for means testing purposes), then you qualify for the conversion to 7 now. The question is, what are you going to do when the Trustee takes the vehicle(s)?

[Richardsonms]

When we filed originally we did not qualify for 7 because of our income. Now my wife has lost her job, so we are down $85K in income. My lawyer has already said that we can convert and that we can keep the cars if we want to pay for them. Not really worried about that issue as much. What I am worried about is how long the 7 will take since up until two weeks ago we had 85K more income than we do now. I am just wondering if we have to wait 6 months for her income to be off or if we can convert immediately and be discharged in 4 months or so. I also am wondering if we convert, when she could return to work. I am assuming it would be best to wait until after the new meeting of the creditors.

[olivies]

I am just wondering if we have to wait 6 months for her income to be off or if we can convert immediately and be discharged in 4 months or so. I also am wondering if we convert, when she could return to work. I am assuming it would be best to wait until after the new meeting of the creditors.

This is why they require a 6month look back. If she's holding off to find work so that you can file a 7 instead of a 13, or can likely pick up new employment soon after the creditor's meeting, that's not exactly being honest with the court.

[wsy]

The income they will look at is the "average" of the past 6 months. If your wife just lost her jobs 2 weeks ago it is not long enough to change your average income over the last 6 months.
I went from a 13 to a 7 but planned it during a job change. I was also audited but since I planned it the audit came out ok.
Hope this helps I know chapter 13 wasnt for me not so much the payments but more on having to ask the trustee if I can use the restroom....Hope this helps...

[Richardsonms]

Actually it is more of a just in case type of question. We had been wanting her to be able to stay home with my youngest. Now her job has made that decision for us. We just want to make sure of everything just in case something were to come up, we know what we can do. If I were to lose my job and she were to have to go back to work then she makes more money than me and we would not qualify for a 7. You can call it dishonest if you want. We have been given an opportunity and are trying to make a decision on it.

[wsy]

Yes, I agree with you. Look at your wifes unemployment as a benefit to get you in a 7. In my case I filed before I started to make my commission since we are paid 2 months in arrears and since the economy was so bad no one would be buying.
My chapter 13 plan called for 6600/mo payments for 5 years and I knew I could not live with that, it was due to assets I needed to repay..
So Kudos to you for thinking about conversion now that my case has been discharged and closed I don't regret what I had to do as far as planning.

[Richardsonms]

Anyone got any love for me?

[tcreegan]

Here is some love Richardsonms, I hope your case does not come down to this: more on having to ask the trustee if I can use the restroom.

Tom in Colo

[Richardsonms]

We are waiting to talk to the lawyers again. I just want to make sure of everything before we move ahead with it. So many things to worry about, so little time.