Chapter 13 to Chapter 7 Conversion

[nikobar]

150 thousand dollars on credit card debt.
125 thousand dollars on student loan debt.
152 thousand dollars on mortgage (surrender)
22 thousand dollars on car loan (keeping it)

At the time i was earning 43K a year. I'm married but all the debt belongs to me. My wife is debt free but not working freshman college student. My attorney created a payment plan including the car. My payment plan now $1000 a month for 48 months. And trustee says they will monitor income. ( I believe they will request tax returns each year.)

I filed Chapter 13 in Western NY district on March 23. 341 Meeting was late because of attorneys family issues. June 7th. and then Plan confirmation is August 2nd. Over 7 months done already! 41 months left.

However right before the confirmation i got %19 income increase. I let the trustee know about this, and my attorney kicked me in the foot while doing it. But i still wanted to say it. Trustee didn't care at all. Even after the increase i'm still below IRS standards by 6 grand. Now I make 51K a year and IRS standards for NY shows 57K.

What hurts me the most is the student loans because payment to unsecured creditors will be %7. This is including the student loans. Student loan interest rate about %6.8 to %18 depending on the loan. Basically each year i will be in more debt.

After reading this website, it looks like i definitely qualified for a chapter 7 but my attorney said that because my CC debt was too high chapter 7 trustee would not approve it. I don't know how much is this true. Anyway, i wanted to see if i can convert to chapter 7 or should i stick to Chapter 13? If i ask for a conversion how much attorney should charge me? Any advice folks?

[Fallonedward]

We are married filing jointly. My cc debt is/was $96K and at not time did my attorney tell us we did not qualify for a 7. I would get some free consults with other attorney's and see what they say

150 thousand dollars on credit card debt.
125 thousand dollars on student loan debt.
152 thousand dollars on mortgage (surrender)
22 thousand dollars on car loan (keeping it)

At the time i was earning 43K a year. I'm married but all the debt belongs to me. My wife is debt free but not working freshman college student. My attorney created a payment plan including the car. My payment plan now $1000 a month for 48 months. And trustee says they will monitor income. ( I believe they will request tax returns each year.)

I filed Chapter 13 in Western NY district on March 23. 341 Meeting was late because of attorneys family issues. June 7th. and then Plan confirmation is August 2nd. Over 7 months done already! 41 months left.

However right before the confirmation i got %19 income increase. I let the trustee know about this, and my attorney kicked me in the foot while doing it. But i still wanted to say it. Trustee didn't care at all. Even after the increase i'm still below IRS standards by 6 grand. Now I make 51K a year and IRS standards for NY shows 57K.

What hurts me the most is the student loans because payment to unsecured creditors will be %7. This is including the student loans. Student loan interest rate about %6.8 to %18 depending on the loan. Basically each year i will be in more debt.

After reading this website, it looks like i definitely qualified for a chapter 7 but my attorney said that because my CC debt was too high chapter 7 trustee would not approve it. I don't know how much is this true. Anyway, i wanted to see if i can convert to chapter 7 or should i stick to Chapter 13? If i ask for a conversion how much attorney should charge me? Any advice folks?

[LaurieM]

When we decide that a client is eligible to convert (for whatever changed circumstance that may be) the fees we charge are the difference between what the client has already paid up-front prior to filing the chapter 13 and what the total chapter 13 fees are... so if they total fee was $1700 (which is what we charge) and they paid $1,000 up front and had paid none of the remaining $700 through the plan since the inception of the plan, we'd want the $700 to convert, plus the court's conversion filing fee of $25.00.

I'd be asking you this question though... if you had enough disposible monthly income to fund a $1,000 per month payment into the plan... what has changed that would permit the filing of a chapter 7 in terms of disposible income when you look at your I/J schedules? ? Is your mortgage in the plan too?

[justbroke]

After reading this website, it looks like i definitely qualified for a chapter 7 but my attorney said that because my CC debt was too high chapter 7 trustee would not approve it. I don't know how much is this true. Anyway, i wanted to see if i can convert to chapter 7 or should i stick to Chapter 13? If i ask for a conversion how much attorney should charge me? Any advice folks?

A Chapter 7 conversion can be complex. Some UST's will look at your disposable monthly income (DMI) as indicated on your Chapter 13's Form B22C (Means Test). If your Chapter 13 Means Test showed that you were under the magic $109.58 or $182.50/month in disposable income, the UST is likely to believe that you were just a "back door" Chapter 7 and saving property, but otherwise qualified for Chapter 7 at the time.

The key is, you must have qualified for the Chapter 7 when you filed the Chapter 13! A conversion doesn't change anything about your case, except the chapter of bankruptcy. Everything remains "as is" on the day you filed the Chapter 13. (You do get to include additional debts incurred from the filing of the Chapter 13 and the conversion to Chapter 7, which is a cool tool.)

Having $100K of credit card debt does NOT keep you from filing a Chapter 7 (or convert to a Chapter 7). What it will do, however, is bring scrutiny from the United States Trustee (UST), which means they will be looking at you closely. Additionally, the fact that you want to surrender your home, may affect your DMI and cause the UST to seek a "totality of circumstances" objection to discharge.

[nikobar]

When we decide that a client is eligible to convert (for whatever changed circumstance that may be) the fees we charge are the difference between what the client has already paid up-front prior to filing the chapter 13 and what the total chapter 13 fees are... so if they total fee was $1700 (which is what we charge) and they paid $1,000 up front and had paid none of the remaining $700 through the plan since the inception of the plan, we'd want the $700 to convert, plus the court's conversion filing fee of $25.00.

I'd be asking you this question though... if you had enough disposible monthly income to fund a $1,000 per month payment into the plan... what has changed that would permit the filing of a chapter 7 in terms of disposible income when you look at your I/J schedules? ? Is your mortgage in the plan too?

My attorney charged $200 out of the plan and $2000 inside the plan. He already got his money by the plan. When i wasn't married so everything was calculated with my expenses only. Now I'm married and my expenses changed. My wife has a car falls a part and we can't even fix it because there is no way for me to come up with the money. I'm also worried with my student loans incurring interest.

[nikobar]

A Chapter 7 conversion can be complex. Some UST's will look at your disposable monthly income (DMI) as indicated on your Chapter 13's Form B22C (Means Test). If your Chapter 13 Means Test showed that you were under the magic $109.58 or $182.50/month in disposable income, the UST is likely to believe that you were just a "back door" Chapter 7 and saving property, but otherwise qualified for Chapter 7 at the time.

The key is, you must have qualified for the Chapter 7 when you filed the Chapter 13! A conversion doesn't change anything about your case, except the chapter of bankruptcy. Everything remains "as is" on the day you filed the Chapter 13. (You do get to include additional debts incurred from the filing of the Chapter 13 and the conversion to Chapter 7, which is a cool tool.)

Having $100K of credit card debt does NOT keep you from filing a Chapter 7 (or convert to a Chapter 7). What it will do, however, is bring scrutiny from the United States Trustee (UST), which means they will be looking at you closely. Additionally, the fact that you want to surrender your home, may affect your DMI and cause the UST to seek a "totality of circumstances" objection to discharge.

According to my attorney, I did qualify for it but he was concerned because my CC was too high. That is why UST accepted my 48 months plan. Normally it is straight 60 months if debtor over the median.

[justbroke]

According to my attorney, I did qualify for it but he was concerned because my CC was too high. That is why UST accepted my 48 months plan. Normally it is straight 60 months if debtor over the median.

You mean the Chapter 13 Standing Trustee, not the UST, accepted your 48 month plan. The UST usually doesn't engage in Chapter 13s unless they are moving to dismiss the case, but generally don't do much in Chapter 13s.

The UST (United States Trustee) is active in Chapter 7 cases where there is a suggestion that granting the debtor a discharge under Chapter 7 would be an abuse of the bankruptcy code.

Any attorney that tells your that your unsecured debt is "too high" for a Chapter 7... probably shouldn't be your attorney.

[nikobar]

You mean the Chapter 13 Standing Trustee, not the UST, accepted your 48 month plan. The UST usually doesn't engage in Chapter 13s unless they are moving to dismiss the case, but generally don't do much in Chapter 13s.

The UST (United States Trustee) is active in Chapter 7 cases where there is a suggestion that granting the debtor a discharge under Chapter 7 would be an abuse of the bankruptcy code.

Any attorney that tells your that your unsecured debt is "too high" for a Chapter 7... probably shouldn't be your attorney.

Was your conversion painful? What type of documentation you had to submit?

[justbroke]

Was your conversion painful? What type of documentation you had to submit?

My conversion was utterly PAIN FREE. First, I was a non-consumer case, but that didn't detract from what needed to be updated. While this varies in "some" Districts, upon conversion, all you need to file is a new Means Test on form B22A, include the $25 conversion fee, and that's it. If you have "additional" creditors to add, then you need to follow the local rules for submitting new schedules and of course the $26 fee for amending schedules. (I got bit by that, although the rules indicated that if you filed the amendments at the time you filed the notice of conversion, you didn't need to pay the $26. Rather than argue with the case manager, I just paid the fee.)

The biggest thing was that I painstakingly reviewed EVERY expense on my Schedule J and Means Test. I actually submitted a new Schedule J as well, because some numbers did change. You just need to make sure your numbers "still" work for a Chapter 7, versus the Chapter 13 you filed. The converted Chapter 7 uses the same numbers "as of" when you filed the Chapter 13. If you have changed circumstances, reduced income, lost job, etc, it's probably better to dismiss the Chapter 13 and refile. However, conversion is the BEST!