How to Convert Chapter 7 Into Chapter 13 After Divorce

By Tom Streissguth

Bankruptcy can provide a bit of shelter from overdue bills and overbearing creditors. In a Chapter 7, a bankruptcy trustee seizes the debtor's "non-exempt" property to pay debts. At the end of the process, the court grants a discharge, which cancels all debts the law allows to be cancelled. The bankruptcy rules allow conversion from Chapter 7 to a Chapter 13, in which debtors keep their property and agree to a partial repayment of debts. Whether the couple remains married or divorces during the process, the steps to conversion are the same.

Bankruptcy can provide a bit of shelter from overdue bills and overbearing creditors. In a Chapter 7, a bankruptcy trustee seizes the debtor's "non-exempt" property to pay debts. At the end of the process, the court grants a discharge, which cancels all debts the law allows to be cancelled. The bankruptcy rules allow conversion from Chapter 7 to a Chapter 13, in which debtors keep their property and agree to a partial repayment of debts. Whether the couple remains married or divorces during the process, the steps to conversion are the same.

Step 1

File a motion for conversion of your Chapter 7 to a Chapter 13. You must provide grounds for the motion. For example, you must be earning enough income to meet a repayment schedule. The federal bankruptcy code provides that the court may only convert a case if the debtor requests or consents to the conversion. In the case of a joint bankruptcy, this means that both spouses must consent.

Get a free, confidential bankruptcy evaluation. Learn More

Step 2

Affirm in the motion that the case has not previously been converted. The bankruptcy court will normally grant a conversion, either from a Chapter 13 or a Chapter 7, but will deny a request to convert if the case has previously converted to Chapter 7 on a motion from a creditor or trustee or by the court. In addition, the court may deny a conversion if it finds the debtor has acted in bad faith during the case, for example by not disclosing valuable assets or failing to list all creditors.

Step 3

Affirm in the motion that both spouses have regular income, and do not have unsecured debts more than $383,175, or secured debts more than $1,149,525. As of April 2014, these are the maximum amounts a bankruptcy debtor may have to qualify for a Chapter 13, and apply to conversions as well as initial filings.

Step 4

Serve the motion on all parties to the case, including creditors and the Chapter 7 trustee. You may accomplish service by mailing a copy of the motion by US mail, with a certified mail return receipt request to confirm that the motion was received. Creditors and the trustee have the right to object to conversion of the case.

Step 5

Attend the court-scheduled hearing on the motion to convert. Answer questions from the judge in full, as well as any objections from creditors, and bring any documentation you have gathered to support the motion. If the motion is granted, you must set up a repayment schedule with a newly appointed court trustee. The repayment plan allows you to discharge of the debt after partial payment over a period of three to five years.

Get a free, confidential bankruptcy evaluation. Learn More
Can One Convert From Chapter 7 to 13 Bankruptcy?

References

Related articles

What Happens if I File Bankruptcy but Leave an Asset Off the List?

Filing for bankruptcy protection is a serious legal business; federal law relating to the complete disclosure of information applies. If you are petitioning for bankruptcy, the law requires that you list all of your assets, meaning anything that you own outright, own jointly with a spouse, or have a contractual interest in. This could be something of value or something worthless in your own eyes. Under the law, it makes no difference -- all assets must be revealed.

Does Every Creditor File a Proof of Claim for Chapter 13?

A Chapter 13 bankruptcy allows a burdened debtor to escape collection actions and lawsuits brought by creditors. A court trustee sets up a repayment plan in which the debtor repays a percentage of his outstanding debts to all creditors who have filed a Proof of Claim form. Important rules in the bankruptcy code govern who needs to file a Proof of Claim to obtain repayment from the debtor.

How to Drop a Bankruptcy

Filing for bankruptcy is a last resort attempt to improve your financial health. Bankruptcy protects you from lawsuits and creditors, and results in the discharge, or cancellation, of most debts. The filing will do serious damage to your credit rating, however, and make it more difficult to qualify for a loan. If your finances improve while you are in bankruptcy, and you no longer need the legal protections, you can request that the court dismiss your case.

Related articles

Define Bankruptcy Terminated

If you file for bankruptcy protection from creditors, a federal court gains jurisdiction over your assets, debts and ...

Schedule F Bankruptcy Discharge

Bankruptcy means a fresh start – a court order protects you from collections and lawsuits, and eventually, the ...

What Won't Be Dismissed in Chapter 7

In a Chapter 7 bankruptcy, often called liquidation bankruptcy, a debtor's non-exempt assets are sold to pay the ...

Can Creditors Sell Debt to a Collection Agency After Bankruptcy Has Been Filed?

When you file for bankruptcy, you ask a federal court to protect you from collection actions and lawsuits by your ...

Browse by category