Must Both Debtors Agree to Convert a Bankruptcy?
Often when the time comes to file for bankruptcy, it is not an individual who files but a couple who have gotten into debt over their financial heads. With personal bankruptcies, couples will either file a Chapter 7 or Chapter 13 petition. Both have advantages and drawbacks, and there may come a time in the bankruptcy process that -- whichever type you filed -- you wish you had filed for the other type. However, your case can be converted to a different type of bankruptcy. If a couple filed the bankruptcy as a couple, then the conversion needs to be made as a couple, too.
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When to Convert
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You can convert your case to another type of bankruptcy at any time during the bankruptcy process. However, you must be eligible for the other type of bankruptcy to which you want to convert. Many couples choose to convert their Chapter 13 bankruptcy to a Chapter 7 bankruptcy when their financial situation changes for the worse during the process. Common reasons are job loss and the inability to make debt payments even under a Chapter 13 repayment plan.
Costs
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The only court cost to convert a bankruptcy is a $25 fee. You may not even have to pay additional lawyer fees, depending on where in the process your bankruptcy case is. The rule of thumb is that the earlier in the bankruptcy process the conversion happens, the less additional money you will wind up paying in additional lawyer fees.
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How to Convert
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To convert a bankruptcy case, you need to file a notice of conversion or motion to convert with the court, and it must be signed by everyone who filed the original bankruptcy. The order is then entered. If you are moving from a Chapter 13 bankruptcy to a Chapter 7 bankruptcy, you will need to file a new means test to show that you qualify for the Chapter 7 bankruptcy.
Involuntary Conversion
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There is a situation when you may not have any say about whether your bankruptcy is converted. When you file a Chapter 7 bankruptcy, you must pass a means test that shows your income and assets are sufficiently low. If you don't pass the means test, the bankruptcy court will convert your case to a Chapter 13 bankruptcy. If the bankruptcy judge believes you were trying to avoid paying your debts and abusing the system, he also has the option of dismissing your case completely.
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