If you are currently using a Chapter 13 bankruptcy repayment plan, you may be wondering what the pros and cons are of converting Chapter 13 to Chapter 7. Although Chapter 13 bankruptcy is a good option for many Ohio residents, there may be situations where a chapter 13 to Chapter 7 conversion may be a better option.
Do you need help deciding if Chapter 7 bankruptcy is a better option than Chapter 13 for your situation? If so, check out this article, where we will be discussing bankruptcy conversion from 13 to 7 and when this may be the right decision.
Understanding Chapter 13 and Chapter 7 Bankruptcy
Chapter 13 and Chapter 7 bankruptcy are two of the most common options that Ohio residents choose if they are in a significant amount of debt. However, these options are quite different, and you will need to understand what they entail and whether or not you qualify for them.
Chapter 7 is a common option that allows for certain debts to be discharged so that you aren’t pursued by creditors. It is a type of bankruptcy that often requires the liquidation of certain assets in order to pay off specific types of debt before other debts can be discharged.
On the other hand, Chapter 13 is a type of bankruptcy that allows you to create a repayment plan that is usually between three and five years. This repayment plan allows you to make monthly payments on your debt, and once your plan is finished, any qualifying debt that is remaining will be discharged. This is an option for those who meet a certain income limit, which may disqualify them from filing for Chapter 7.
Can You Convert Chapter 13 to Chapter 7 Bankruptcy?
There may be situations where you have already filed for bankruptcy but later decided that a different type of bankruptcy may be more suitable to your situation. The good news is that it is possible to convert a Chapter 13 bankruptcy plan to a Chapter 7 plan in Ohio if you qualify.
For most people, they are looking into the pros and cons of converting Chapter 13 to Chapter 7 because they can no longer afford their Chapter 13 plan. Chapter 13 is a repayment type of bankruptcy that creates a repayment plan that allows you to make monthly payments toward your debt. If your financial situation has changed, you may find yourself unable to make these monthly payments.
Another situation where it may be beneficial to convert your case is if you have decided to surrender an asset that was in your Chapter 13 payment plan. You may want to surrender your home or a vehicle that Chapter 13 was supposed to save, and you no longer need to make those payments.
No matter the situation, it is essential that you hire a bankruptcy attorney in Ohio to help you as you navigate this decision. An attorney will understand the bankruptcy laws in Ohio and can help you examine your situation to decide if you are eligible and if converting would be a beneficial decision.
Pros and Cons of Converting Chapter 13 to 7
There are many pros and cons of converting Chapter 13 to Chapter 7, depending on your financial situation. This may be something that is entirely necessary if you can no longer afford your Chapter 13 repayment plan, or you may simply think that Chapter 7 is a more suitable option.
Here are some of the benefits of converting Chapter 13 to Chapter 7:
- Debt discharge is usually completed within six months.
- Doesn’t require a repayment plan.
- Discharges qualifying debts instead of requiring repayment.
Additionally, here are some of the drawbacks you may experience if you convert a Chapter 13 plan to Chapter 7:
- You may have to liquidate certain assets.
- You may not be protected from foreclosure or repossession.
- Chapter 7 will remain on your credit report for 10 years.
Keep in mind that the pros and cons of this decision will also be dependent on your particular financial situation. For example, you may not have to necessarily liquidate any assets if they are exempt under federal or state law.
How to Convert Chapter 13 to Chapter 7
If you are currently on a Chapter 13 repayment plan, it may be because you did not qualify for Chapter 7. Chapter 7 bankruptcy requires you to pass a means test, and if you are over the income limit, you will usually be required to file for Chapter 13 instead. Even if this is the case, you can still convert Chapter 13 to Chapter 7.
The Ohio court does not require that you pass the means test for Chapter 7 if you wish to convert your Chapter 13 plan. However, you may be required to provide an explanation of why you wish to convert, such as explaining how your financial situation has changed.
When you start the process of converting your plan, a new Chapter 7 bankruptcy trustee will be assigned to your case, and you’ll have to attend a new meeting of creditors. Although a new bankruptcy petition is not required, you may have to file additional forms and schedules to showcase your current financial situation. If you have secured debt, you will also need to file a statement of intention, and you will need to disclose if you have incurred any post-petition assets or post-petition debts.
An experienced bankruptcy attorney will be able to help you through this process, ensuring you follow all of the necessary steps. They may also be able to help you protect larger assets, such as your house or car from being liquidated when you make the switch to a Chapter 7 plan.
Contact a Bankruptcy Attorney in Ohio
Do you want to know what happens when you convert a Chapter 13 to a Chapter 7 bankruptcy plan? Richard P. Arthur, Attorney at Law, can help you navigate this decision to find the best bankruptcy option for your situation. Richard P. Arthur has handled hundreds of bankruptcy cases across Ohio and can help you choose the best option to fit your financial goals. Contact us today at 937-254-3738 for a consultation.