Because of the real estate bubble that happened back in 2008 there has become a large interest in Chapter 13 bankruptcy. The power of a Chapter 13 really shines in stopping a foreclosure, while allowing the debtor to get caught up with back payments and negotiate a payment plan with the bankruptcy court. One of the fears of many going into a Chapter 13 bankruptcy filing is whether or not they will be able to continue making the payments for the 3 to 5 year time frame. There is no reason to worry because all the debtor will need to do is to contact their bankruptcy attorney and asked to modify the court ordered Chapter 13 plan. That's another feature of Chapter 13 bankruptcy that most people don't understand. There is an allowable amount of flexibility when filing bankruptcy under Chapter 13. The court understands that everything in a person's life is not set in stone. In today's current economy this is even more so. Many Americans today are struggling just to keep a job, any job and the court understands that.
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If for some reason, the individual filing bankruptcy under Chapter 13 cannot continue making the payments the debtor can call their bankruptcy attorney and ask to convert it to a Chapter 7 bankruptcy. Section 1307(a) of the Bankruptcy Code states, that if you haven't previously converted your case from another chapter, the debtor can convert their bankruptcy to a Chapter 7 for any reason providing they qualify under the means test.
Nowadays, there are many reasons why people want to convert their Chapter 13 to a Chapter 7 bankruptcy. The most common would probably be, the debtor is having a tough time keeping up with the Chapter 13 payment plan. If the debtor can't continue making the payments, the bankruptcy trustee will file a motion with the court to dismiss the case. Obviously, this won't help the debtor's financial situation and the Chapter 7 bankruptcy might be an optional solution.
Many people use Chapter 13 bankruptcy for the reason of protecting their home and/or their car from foreclosure and repossession. If the debtor for some reason decides that they no longer want to keep their home or vehicle they no longer will need to be in a Chapter 13. They can convert to a Chapter 7 bankruptcy and wipe out all their unsecured debt. The Chapter 7 will also eliminate any deficiency owed on the property and also wipe out any future liability.
Using your bankruptcy attorney to convert the Chapter 13 to Chapter 7 is relatively easy. The bankruptcy attorney files a motion to convert with the Bankruptcy Court. The court will then enter a Conversion Order in the next couple days. Most likely, the debtor will be required to file a new means test showing they qualify for Chapter 7 bankruptcy. If all is good, the Chapter 13 trustee will return any funds they were being held to pay creditors.
The debtor can do this entire process on their own, but it's not advised. I suppose you could do surgery on yourself but the results might not be as good as having a surgeon do it instead. The cost of hiring a bankruptcy attorney is minimal when you compare the amount of debt you're discharging and the headaches you're avoiding.
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