From Chapter 7 to Chapter 13: Should You Make the Switch?

Bankruptcy in Sandy

Bankruptcy in SandySome debtors who first filed for Chapter 7 bankruptcy consider converting their case to Chapter 13. There are various reasons for doing so, with some realizing that the latter provides more options and is much suitable for reaching their financial goals. Some, other hand, is advised to convert to avoid dismissal of their bankruptcy case.

If you can’t quality for Chapter 7 or failed the means test, you can choose the other option. Chapter 13 bankruptcy lawyers in Sandy share some of the other good reasons you may wish to convert.

Pay Your Loans

With Chapter 7, you can’t catch up on missed car or home loan payments. While there is the automatic stay, some secured lenders will get relief to continue with foreclosure or repossession of your property. With Chapter 13, however, you can pay some of your debts through a repayment plan. When you convert, you may be able to save your home or vehicle.

Remove Second Mortgage

Chapter 13 bankruptcy may also allow you to get rid of your home’s second mortgage and some other liens. If the balance of your first home loan exceeds the value of your property, you can file for a motion to remove the liens from your house. You can also lower the principal balance on your car loan with Chapter 13 cramdown. This is not possible with Chapter 7.

Keep Nonexempt Assets

In Chapter 7, the trustee will sell all your nonexempt assets to pay the creditors. If you don’t want to lose such assets, convert to Chapter 13. This will allow you to keep the non-exempt assets in exchange of paying unsecured creditors. In this case, however, you still need to show that you have the income to keep up with the repayment plan.

There a few other reasons it is advisable to convert to Chapter 13. You can also switch to pay your priority debts like child support or certain tax liabilities. It is best, however, to talk to a bankruptcy lawyers to guide you in the process. The right bankruptcy attorney can explain all the available options and help you decide.