Chapter 7 bankruptcy is basically liquidation – all of the debtor’s assets (besides those which can be exempt) are sold to pay off his or her debts. The debtor is allowed to keep property or assets if those items would enable the debtor to "start over." The biggest possible exemptions are retirement savings accounts and principal dwelling homes.
Chapter 13 bankruptcy is a structured repayment plan, and involves a debtor paying off as much of his or her debt as possible over a 3-5 year period. Wages beyond what the debtor needs are garnished, or taken, so that creditors are paid off.
Bankruptcies can be converted once for any reason, without court approval. However, to switch back, approval of the bankruptcy court is required, and they will rarely allow a debtor to make multiple switches. Debtors often switch from Chapter 13 to Chapter 7 if the debtor:
Note that in switching from Chapter 13 to Chapter 7, much of the debtor’s property is now up for grabs to be sold off to pay his or her debts. However, if the debtor cannot make the payments under a Chapter 13 bankruptcy, switching to Chapter 7 may be his or her only option.
Yes. Judges can order that a debtor use a different form of bankruptcy if:
Chapter 7 Bankruptcy has a number of requirements that debtors must meet before filing for Chapter 7. These requirements include the "means test." Courts are divided as to whether the means test requirement applies to debtors who are converting to Chapter 7 or if the means test is only for debtors who initially file for Chapter 7.
Filing for bankruptcy is a difficult and emotional decision filled with embarrassing and complicated issues. Converting from one type of bankruptcy into another can be confusing, especially if the paperwork looks the same. A bankruptcy attorney is familiar with the new laws and can help you through this difficult time, explaining your options and determining which is best for you.
Last Modified: 04-24-2018 02:09 AM PDTLaw Library Disclaimer
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