If you would like to file for bankruptcy without losing your Florida home or other property, it may be in your best interest to seek Chapter 13 protection. However, there may be some drawbacks to doing so, such as the fact that a Chapter 13 case can last for up to five years. The good news is that it may be possible to transition to a Chapter 7 proceeding.
How to qualify for a Chapter 13 to Chapter 7 conversion
To qualify for Chapter 7 bankruptcy, you must be able to pass the means test. The means test will determine whether you have enough money left over every month to make payments to creditors. You must also be able to show that a change of circumstances has made it impossible to continue making Chapter 13 plan payments on time.
For instance, you may be able to claim that a job loss or an unexpected medical bill has rendered you unable to stick to the approved repayment plan. It is worth noting that you don’t qualify for Chapter 7 protection if you have had a previous liquidation bankruptcy discharged in the past eight years.
The potential drawbacks of such a conversion
If your Chapter 13 case is dismissed because you stop making plan payments, you can typically file for Chapter 7 protection immediately. However, your automatic stay may only last for 30 days as opposed to remaining in effect for the duration of the proceeding.
It is also important to note that you may have to liquidate your home, car or other possessions that you were allowed to keep under the terms of a Chapter 13 repayment plan. However, any debts that were accumulated after your Chapter 13 proceeding began would likely be eligible for discharge in your new Chapter 7 case.
Filing for bankruptcy may help you eliminate credit card, personal loan or other types of debts. It may also put an end to creditor collection activities or give you leverage to renegotiate the terms of secured auto or home loans.