My St. Louis bankruptcy clients often file Chapter 13 bankruptcies in order to save their house from foreclosure. Other times, individuals files Chapter 13 bankruptcy because their household income is above the median income for their family size. For instance, if you are a household of one and make over one hundred thousand dollars a year, you make more than the median income and make too much to file for Chapter 7 bankruptcy relief.
For purposes of this article, let’s say you are in the first category, and are someone who is trying to save their house from a foreclosure. You and your wife bring in a total of $53,000 per year. In this situation, you would probably file a Chapter 13 to stop the foreclosure, but you would be below the median income level (which means you could have filed a Chapter 7 instead).
I have had several clients in the past who fit this set of circumstances. They are below the median income for their household size and would normally be a straightforward Chapter 7, but for the fact that they wish to keep the home. After being in the Chapter 13 for a while, they find it difficult to make payments to both the Trustee and the mortgage company. At that point, they might wish to go ahead and surrender the house and convert to a Chapter 7.
What makes it easy to convert to a Chapter 7 from a Chapter 13 is the fact that the client was from the very beginning a below median income household (meaning, they could have been a Chapter 7 filing from the start). You don’t lose that status, even though you filed a Chapter 13 first.
A more complicated scenario arises when someone files a Missouri Chapter 13 because they are above the median income level for their household size and can afford a repayment to their creditors. Then after being in the Chapter 13 for a while, the Debtor loses his or her job or their income is otherwise drastically been reduced. In such a scenario, there is a possibility of converting from a Chapter 13 to a Chapter 7 in light of these new facts. if documentation can be provided showing the loss of income, then a conversion can usually still be managed.
If you have questions related to whether or not a conversion is best for you, please contact the St. Louis bankruptcy attorneys at Brinkman & Alter, LLC. Our staff is eager to hear from you, and all phone and office consultations are free of charge.