Can I Change From One Bankruptcy Chapter to Another?

As a Bankruptcy Attorney, I occasionally have clients ask, “Can I change from one chapter to another under the bankruptcy code? And if so, which chapter should I file under?”

The short answer is: Yes. You may convert from a Chapter 7 to a Chapter 13, and vice-versa, with certain restrictions and limitations.

A Recap of Chapter 7 and Chapter 13 Bankruptcies

Chapter 7 bankruptcy provides for complete liquidation of the debtor’s non-exempt assets. This involves the bankruptcy trustee selling all of the debtor’s assets, subject to certain statutory exemptions, and paying the creditors’ with the liquidation proceeds. However, Chapter 7 cases often result in the debtor keeping all of their assets, in part because they were done correctly by an experienced bankruptcy attorney.

If an individual’s current monthly income is more than the state median then the bankruptcy code requires the debtor to meet a “means test” to ensure the Chapter 7 filing is not presumptively abusive. Unless the individual overcomes this presumption, the case will typically be converted to a Chapter 13 bankruptcy or dismissed.

Chapter 13 (“wage earner’s plan”) is another part of the bankruptcy code that allows individuals to halt collection actions and present a repayment plan to debtors that takes place over three to five years. If a debtor’s current monthly income is less than the state median then the plan will generally be for three years, and if the individual’s current monthly income is greater than the state median, then the repayment plan will be five years.

Converting From One Chapter to Another

As mentioned, a Chapter 7 filing may be converted to a Chapter 13 bankruptcy proceeding.

A debtor may convert a Chapter 7 to a Chapter 13. This may be done for a variety of reasons. For example, a debtor may file under Chapter 7 and realize that Chapter 13 may be a better alternative — especially if the debtor wishes to keep certain property, does not satisfy the means test, or wishes to consolidate their debts and enter a repayment plan. This will stop collection efforts and allow the debtor to emerge from the bankruptcy plan with a “clean slate.”

However an individual cannot file under chapter 7 or any other chapter if during the preceding 180 days a prior bankruptcy petition was dismissed due to lack of the debtor’s cooperation (including appearances), or the debtor voluntarily dismissed the previous case after lien creditors sought relief from the bankruptcy court to recover property. There are certain eligibility requirements that will not allow conversion to a chapter if that case had previously been converted.

Contact a Centennial Bankruptcy Attorney

As a former trustee for the U.S. Bankruptcy Court, with over thirty years’ experience, Bankrupcy Attorney Martin Long is an expert in the industry with decades of experience in Bankruptcy Law in Centennial Colorado. We also serve Aurora, Loveland, Highlands Ranch, Denver, Littleton, Castle Rock, Colorado and the Denver metro area with three convenient locations. For help with your financial matter, contact the Law Office of Law Office Of Long & Long P.C. for a free initial consultation at (303) 832-2655.