Notice Of Conversion From Chapter 7 To Chapter 13
A significant number of debtors with regular income automatically convert their bankruptcy case from chapter 7 to chapter 13. This often happens when there are questions by creditors about whether the debtor is eligible for a chapter 7. To be eligible for a chapter 7 bankruptcy a debtor has to pass the Means Test. Creditors do not like chapter 7 bankruptcies because most of the time the debtors’ unsecured debts are wiped out. Converting a chapter 7 to a chapter 13 happens less frequently than converting a chapter 13 to a chapter 7.
The Means Test
Your income must be below Colorado’s household median income to pass the Means Test, but you may still be eligible if your expenses bring your income below a certain amount. You may have to file for a chapter 13 if the means test calculation shows that you may be able to pay a portion of your unsecured debts. An easier way to tell whether you may not qualify for chapter 7 in Colorado is if you retain a substantial amount of your income after paying your expenses. You are exempt from the Means Test if your debts are not primarily consumer debts, or you are a disabled veteran that incurred their debt while in active duty.
Chapter 13 Bankruptcy
Most debtors prefer a chapter 7 bankruptcy because it means most of their unsecured debts will be wiped out or discharged giving them a fresh start. But many are made to file a chapter 13 because they have enough monthly disposable income that can be garnished for a chapter 13 repayment plan. You are eligible for a chapter 13 if your debts are not more than $360,475.
Remember that filing a chapter 13 bankruptcy does not mean that you will pay all your unsecured creditors 100 percent of what you owe them. In fact, most of the time people made to file for a chapter 13 end up converting to a chapter 7 because they cannot keep up with the monthly payments. A repayment plan under chapter 13 takes between 3 to 5 years after which most of the remaining debt will be discharged.
Debts Not Discharged Under Chapter 13 In Colorado
The debts that will not be discharged in chapter 13 include:
- Debts for alimony or child support
- Certain taxes
- Fines for DUI personal injury cases or from wrongful death
- Debts from government funded loans
A Chapter 7 Discharge
What most people don’t know is that just filing for a chapter 7 does not always mean that all your loan repayment obligations will disappear. People that received a chapter 7 within the previous 8 years do not qualify for a chapter 7 discharge when they file a chapter 7 again. In this situation you will have to pay any debt that remains after your trustee has paid some of the amount using proceeds from sold assets. The only advantage here is that the amount you will have to repay will be lower than what you owed initially.