Can A Chapter 13 Be Converted To A Chapter 7?

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I filed a chapter 13 about a three and half years ago. Is there any way that you can convert that to a 7? I am still in the 13.
One of the big reasons that I did a 13 was so I could keep my house but I’m not quite sure my house is worth keeping.

Yeah, that’s the story in Colorado these days. OK, so you were maybe heading towards a foreclosure and you file the 13 to make up the arrears but 3 and half year into it the house value is gone down to the point where you going to save a house that’s under water.

Well, not only the value have gone down but so many repairs on my house that by the time you sink all the money into it. I am wondering if it’s at a point where I mean it’s just may be better for me just you know walk away from it

It’s usually me having this conversation from the other side. Where I’m trying to, you know, I can see the writing on the wall. The house is under water and maybe the repairs are a mounting and the client isn’t wanting to depart with the house. That’s kind of nice to have the other way around for a change where you have already reached that conclusion and done your own math in figuring. Well yeah I mean the only thing you really have to do as far as preparatory work is just make sure that you personally qualify for a chapter 7 prior to converting it. But as long as your income is within the boundaries for your household size and you want to sit down and make sure you look through the assets that you have and make sure all those are protected as well but converting isn’t really that complicated of a process.

I mean, you essentially just put in a motion to convert the case with the court house and then they’ll grant that. And if you remember back when you originally filed the chapter 13 you had a 341 hearing that you had to go to about a month later. Well, you get to go to another one of those. But this time with a chapter 7 trustee. But it’s, you know, pretty much the same process. Since you’ve already been through, you would already know this, but those are not intimidating hearings. They are little short sit downs. But yeah, you can do that. You can convert the 13 to a 7 and then you’d be on a much shorter time frame. You’d essentially do the conversion. They’d send you out a notice let you know when the hearings going to be. You attend to hearing and then about 60 days after the hearing the court’s able to issue a discharge order in your case. And, you know, maybe a month or two later you would get a closing order mailed to you and that would be the end of it.

If I would do that would I destroy any credit that I’ve already built up?
Well, I mean the bankruptcy itself should’ve done a number on the credit score. It’s kind of interesting, you know, what you filed is what we call kind of an old fashioned 13. You know a lot of 13’s that are filed today are because of income qualification reasons and prior to that the primary reason was done just to save a house.

But I always kind of think of a chapter 7 is more of a giant reset on your credit score as oppose to a 13 where you are just doing basically a gradual build. So that 3 and half years that you were in the chapter 13 bankruptcy, you are making a monthly payment to the 13 trustee and that payments reporting positively to the credit bureaus. We know you are making your house payment because you wouldn’t still be in a chapter 13 if weren’t so that was reporting positively. So you’ve probably seen a significant amount of growth during that time. But you know, you just kind of have to re-tool how you are working your credit score if you are going to do it through chapter 7 now. Now you’ll have the work that you have done so far into it but what you probably want to do if you are going to walk away from the house you are going to lose that positive reporting and the 13’s positive reporting won’t be there.

So we need to supplement those and really simple ways to do it and simple stuff is the best because that’s the step that you are going to continue doing for a long period of time as opposed to more complicated schemes that some of the books suggests that I see people do it may be 2 or 3 months but realistically I don’t think I’d have the attention span to do some of those things doing more than 2 or 3 months. But those simple stuff is simple. You just go get may be two or three credit cards and a sharpie marker and write fuel at the bottom of one, groceries at the bottom of another and something else you already have to pay for any way every month at the bottom for the third. Just funnel one household expense through each card each month pay it off like you normally pay for those things. They’ll report positively for you.

Do you have a financed vehicle? Yes.

OK, that’s going to help you as well it’s the real trick if you are just doing a credit card game your going to get growth to your credit score but it’s going to be painfully slow and steady. The trick to it is to get different types of debts reporting positively at the same time so your credit cards are all going to report as revolving unsecured debts positively. Your car notes going to report as an installed secured debt positively. And then if you have student loans, those are unsecured installment. But essentially, after that you just start looking for different varieties of loans to be able to take out. You know, conservative things that are not going to cause you an issue or anything. But coming out of 7 if you just have the credit cards going and then the car notes just as a reference you know may be 5 or 6 months after the 7 you should be in good shaped buy a car at a completely normal interest rate, good interest rate (5, 5.5% something like that.

My car is good and I’m not planning on buying another care for a while.

If you are happy with what you got then you are in a good shape. But just as a sort of reference of what you could do with your score and then if you decided at some point down the line you wanted to buy a house most folks are doing that at about 18 months to 2 years at perfectly normal good interest rates.

To continue reading the answers, see the text below or jump to another question using the links below:

  1. How Do You Know If You Qualify For A Bankruptcy?
  2. What Is Unsecured Debt?
  3. What Is The Process Of Bankruptcy Like?
  4. Can A Chapter 13 Be Converted To A Chapter 7?
  5. What Is the Process Of Bankruptcy Like – Part 2
  6. When Is The Best Time To File?
  7. How Can I Rebuild Credit After A Chapter 13?
  8. Can A Chapter 13 Be Amended?
  9. Can Filing Bankruptcy Prevent An Increase In Out Of Court Settlement?
  10. Is There Any Way To File Bankruptcy And Keep My Car Or My House?
  11. Will People From The Bankruptcy Court Send Someone To My House To Look At My Stuff?

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