There are different types of bankruptcies, based on different chapters of the United States Bankruptcy Code. The two chapters most commonly used by consumers are Chapter 7 and Chapter 13. For an explanation of Chapter 7 and Chapter 13, see my article entitled, “The Difference Between Chapter 7 and Chapter 13, and Which One Is Right For You.”
It is possible to file a bankruptcy under one chapter, and later on convert your bankruptcy to another chapter. Example 1, your case starts out as a Chapter 13 repayment bankruptcy in which you repay your creditors what you are able to pay. In a Chapter 13 repayment bankruptcy you must have enough disposable income to fund the repayment. If your income goes down or your expenses go up such that you are no longer able to fund your repayment plan, you may consider converting your bankruptcy from a Chapter 13 repayment bankruptcy to a Chapter 7 debt liquidation bankruptcy.
Example 2, your case starts out as a Chapter 7 debt liquidation bankruptcy in which most of your debts are eliminated rather than having to repay them. One of the factors to qualify for Chapter 7 bankruptcy is that you have little to no disposable income. If your income goes up and your expenses go down such that you do have the ability to repay some of the money owed to your creditors, you may need to convert your bankruptcy from a Chapter 7 debt liquidation bankruptcy to a Chapter 13 repayment bankruptcy.
When a bankruptcy is converted from one chapter to another, it is not a new case. It is still the same case with the same Judge and the same case number. The Trustee appointed by the Bankruptcy Court to administer your case will change, because there is one set of Trustees for Chapter 7 cases and another set of Trustees for Chapter 13 cases. You will have to attend a meeting of creditors for the chapter you convert to, even if you already attended a meeting of creditors before your case converted chapters.
For an explanation of the meeting of creditors, see my article entitled, “What to Do at Your Meeting of Creditors.”
There are many situations in which it is necessary to convert your bankruptcy from one chapter to another.
The above information is a general overview and is not intended to be used as legal advice. If you are considering filing for bankruptcy, the best thing to do is call our office at 248-557-3645 and schedule a free consultation so you can receive advice which is tailored to your specific circumstances.
By: Michael Benkstein, Esq.
Managing Attorney, Bankruptcy Department
The Law Offices of Joumana Kayrouz, PLLC