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A.J.
A.J., Attorney
Category: Bankruptcy Law
Satisfied Customers: 4282
Experience:  Experienced consumer bankruptcy attorney.
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If I am in a Chapter 13 can I change over to a Chapter 7?

Customer Question

If I am in a Chapter 13 can I change over to a Chapter 7?
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  A.J. replied 1 year ago.

SavyLawyer :

Hello, and thank you for contacting Just Answer. My name isXXXXX am a bankruptcy law professional, and I look forward to answering your question this morning.

SavyLawyer :

Yes, you certainly can "convert" a chapter 13 bankruptcy to a chapter 7 bankruptcy if you qualify for chapter 7 bankruptcy and the conversion would not be considered a fraud against the creditors.

SavyLawyer :

In order to qualify for a chapter 7, you need to pass the "means test", which means either having a household income that is below the median income in New Jersey for your household size, or by comparing your income to your necessary expenses (there is a long worksheet that the debtor can use to determine if they qualify under the second type).

Customer:

I am asking this because I was told by another lawyer who i don't know that we could do this. We have been paying chapter 13 for alomost 3 years. We were told that we do qualify for a 7 and the lawyer we retained for the bankrupcy should of told us this when we moved out of our house almost 2 years ago

SavyLawyer :

That makes sense, and certainly when you initially sit down with a bankruptcy attorney they are supposed to provide information on the various types of bankruptcy available to debtors, and review which might be best for you. It may be that, at the time, a chapter 13 was the best possible choice, but at the very least a debtor must be made aware of the availability of a chapter 7.

Customer:

We are in forclosure with the house that we gave up almost 2 years ago. We are very gun shy at this point and don't know who to believe as the lawyer we had hasn't talked with us for almost 3 years

Customer:

We were told that when we moved which he did know that we had the option of converting to a 7

SavyLawyer :

Well, if the lawyer that you worked with is still practicing and refuses to return your phone calls, you have the right to file a grievance with the court system. For information on how to file a grievance, go to:

SavyLawyer :

http://www.judiciary.state.nj.us/oae/atty_disc/atty_disc.htm#filing

SavyLawyer :

As for what bankruptcy options are available to you now, if you fall under the median income threshold, and you have already given up your home, a chapter 7 may be the better option as it allows you to stop paying on most debts (Excluding certain tax, student loan, and alimony/child support debts).

Customer:

When we did the 13 at the time we were going to trey to keep our house. We did a loan mod with the mortgage co. after about a year taxes everying went up and our income went down so that when we decided to move out of the house. We have a second lein but Bank of America refused to settle

SavyLawyer :

In that case, if the house is already in foreclosure, but there is still debt on the home, chapter 7 may be the better option because you are already losing the house, why not eliminate the debt at the same time (which a chapter 7 bankruptcy would do). Now, it is important to check to make sure that there is no other property that could be threatened were you to file a chapter 7 petition. Both the federal government and most states have a list of property that is exempt in a chapter 7 from seizure by the bankruptcy trustee to pay your creditors before discharging the debt. For a list of bankruptcy exemptions in New Jersey, go to:

SavyLawyer :

http://www.nolo.com/legal-encyclopedia/new-jersey-bankruptcy-exemptions.html

Customer:

I guess we are having a Trust problem with lawyers. Why would this lawyer not tell us about converting to the 7 when he knew we were giving up the house? does he profit from the trustee payment we make every month?

SavyLawyer :

That is a fair question, but without having been a part of the situation it is probably going to be difficult for me to answer. Just like in every profession, some attorneys are more ethical than others. It is certainly possible that this attorney either made an honest mistake or, at the time, believed that a chapter 7 was the best option for you (maybe there were other assets to protect, such as a vehicle that you have a lot of equity in?). Or, it is certainly a possibility that the attorney was motivated by profit. The attorney does not benefit directly from money to the trustee, but they generally do charge more for a chapter 13 because they are often more work than a chapter 7. So no, the attorney does not profit from the trustee payments (unless their fee was built in to the payment plan). However, a chapter 13 does usually cost more in legal fees, so there is potential profit there.

SavyLawyer :

I can certainly understand your hesitancy, but most attorneys are competent professionals who will at the very least make sure you understand what your options are. If you do want to seek a new attorney, the state bar association has a list of referral services by county at:

SavyLawyer :

http://www.njsba.com/for-the-public/lawyer-referral-service.html

SavyLawyer :

At the very least, a referral from one of these services would be to an attorney in good standing with the bar association.

SavyLawyer :

I wish that I could tell you exactly what happened and why a chapter 7 was not explained to you at the time, but I just cannot. The best that I can say is that you could try and discuss this with the attorney in question. If they refuse to talk about it reasonably, you have the right to file a grievance as I mentioned above:

SavyLawyer :

http://www.judiciary.state.nj.us/oae/atty_disc/atty_disc.htm#filing

SavyLawyer :

As for converting to a chapter 7, based on the information provided it certainly does sound as if a chapter 7 is something you should at the very least be considering, particularly if the home is already in foreclosure, as a chapter 7 would resolve the underlying debt on the home for all creditors with whom you had a mortgage. There may be other property at risk, so it is worth looking through the exemptions (particular regarding vehicles, which is usually the second most valuable thing people own and want to protect after a house).

SavyLawyer :

Although I certainly understand your lack of trust in attorneys because you have had a bad experience, working with an attorney to convert the bankruptcy (and really to determine whether that is in fact the right option for you).

SavyLawyer :

I hope this chat has been helpful, and I appreciate the opportunity to answer your question. If you have any further questions, please do not hesitate to ask. Otherwise, please remember to RATE my answer so that I can receive credit for my work.

Customer:

Thank you so much Adam. I will discuss this info you gave me with my husband. We just want this whole house/chapter13 to be over with. The only asset we have is a 2008 truck which is our only vehicle and we are still making payments on it. We are in an apartment now. So there are no assets

Customer:

Thank you Adam.

SavyLawyer :

I completely understand and you are most welcome, it has been a pleasure chatting with you this morning. If you do not have any further questions, please remember to RATE my answer so that I can receive credit for my work.

A.J., Attorney
Category: Bankruptcy Law
Satisfied Customers: 4282
Experience: Experienced consumer bankruptcy attorney.
A.J. and other Bankruptcy Law Specialists are ready to help you

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