Sacramento Bankruptcy: What is a Bankruptcy Conversion?
Bankruptcy conversion is changing the chapter of your bankruptcy filing after you have already filed. Types of bankruptcy are organized by chapters of the federal law that created them. Though there are many types of bankruptcy chapters, the most common for consumers are Chapter 7 and 13. Other areas of this website address all of the differences between Chapter 13 and 7 bankruptcies. But for this issue, suffice it to say that you repay at least some of your debts in a Chapter 13 (bankruptcy reorganization), but none in a Chapter 7 (bankruptcy liquidation).
If you file for one type (or chapter) of bankruptcy and, later, decide to do another before your case is complete, you can convert your bankruptcy. This means that you change your case from one form of bankruptcy filing to another without having to refile your case. Much of the information in your new bankruptcy chapter will have to be provided after you convert. But you won’t have to refile another case to do it.
Refiling a bankruptcy often comes with a penalty. To prevent people from filing too many bankruptcies, particularly in quick succession, Congress imposed restrictions on later filings to inhibit them. If, for whatever reason (and there can be many), you do need to refile a bankruptcy, it can be done. Usually, too, there is no penalty for doing so, especially if the cases are spread broadly over time. But if someone files bankruptcy 3 times in year, there likely would be problems. By being able to convert your case, you eliminate possible problems with future bankruptcy needs.
Converting your bankruptcy can also save you money. Instead of having to refile a brand new case with a brand new filing fee, you only have to pay a conversion fee, which saves you hundreds of dollars.
Most importantly for a conversion, it gets you where you want–or need–to be. For example, if you are in the midst of a Chapter 13 bankruptcy reorganization and can no longer afford your plan payments, you may need to convert to a Chapter 7 liquidation. Bankruptcy conversion laws allow you to do this. Loss of a job or other financial obstacles that can prompt a bankruptcy filing can also prompt a bankruptcy conversion.
Allowing for conversion also allows filers the freedom of flexibility. They know that if something changes for them that prevents them from one form of bankruptcy filing may allow them bankruptcy protection and benefit in another. So if you are trying to repay a portiImage result for job loss bankruptcyon of your debt in a Chapter 13 bankruptcy but, because of a job loss, can no longer do it, you can convert your case to Chapter 7 and still discharge your debt.
Conversion is one of many tools available in a bankruptcy filing. Bankruptcy should never be this frustrating. And it is a good option within a bankruptcy if you need it.