Can I Convert From One Bankruptcy To Another?
One of the first considerations a person must make when deciding to file for bankruptcy is which specific chapter they wish to file under. A problem that sometimes occurs is when a debtor has filed for one type of bankruptcy, but under unforeseen circumstances must convert to another bankruptcy. This is called a bankruptcy conversion.
If you cannot afford to repay your debts and are willing to possibly liquidate assets in exchange for wiping out some or all of your debt owed, filing Chapter 7 bankruptcy is the way to go. Chapter 7 may also be a good option if you do not own assets that contain a substantial amount of equity in them such as a home. Individuals who are working and able to pay back their debt over time may find filing for Chapter 13 bankruptcy appealing. If you want to keep your assets and ask for more time to repay creditors, filing for Chapters 11, 12, or 13 are options.
Regardless of what Chapter of bankruptcy you file under initially, you may decide another Chapter will better fit your needs. If this is the case, speak with your bankruptcy lawyer about filing for a bankruptcy conversion.
How Does Conversion Work?
Conversion is a process by which a debtor, creditor, or bankruptcy trustee request that the Court transfer an ongoing bankruptcy case from one chapter to another. There are multiple reasons a conversion may be required, and they may be voluntary or involuntary depending on the circumstances.
For example, a debtor may have originally filed for Chapter 13 and entered into a payment plan. Through unexpected circumstances that same debtor may have lost their job and can no longer afford the payments required under their Chapter 13 plan. They might then request a conversion from a Chapter 13 to a Chapter 7 bankruptcy.
Can Conversion Requests Be Denied?
Every debtor has the opportunity to apply for a bankruptcy conversion. However, sometimes the request to convert from one bankruptcy to another may be denied. If the Court finds that the conversion would results in an abuse of the Bankruptcy Code or if a conversion is made in bad faith, a Debtor’s conversion request could be denied.
For example, if the debtor is unemployed or has very low income, they may not be able to convert their Chapter 7 bankruptcy to a Chapter 13, because of their inability to comply with the monthly payments necessary.
Alternatively, if the Court believes that an individual in Chapter 13 makes too much money to qualify for a Chapter 7 discharge, the request to convert from Chapter 13 to Chapter 7 could be denied.
In the simplest explanation, someone who is in debt must meet the requirements for the new chapter they wish to convert to.
Other Bankruptcy Conversions
If a creditor makes a motion to the Bankruptcy Court to force a debtor to convert, and the Court grants that request, a court-ordered conversion occurs. However, this is limited to cases that begin as either Chapter 7 or Chapter 11 bankruptcy cases and the Debtor must still be eligible for the Chapter which the creditor is requiring conversion to. The bankruptcy court does not convert to Chapter 12 or 13 bankruptcies without the debtor having a hand in it as this would be deemed involuntary servitude.
You cannot convert to Chapter 7 if you have received a Chapter 7 discharge within the previous eight years.
Ask an experienced Los Angeles bankruptcy attorney if a bankruptcy conversion is the right choice for you. Many factors should be analyzed before going through with any type of bankruptcy conversion, factors that should be discussed with your lawyer.