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Ch 13 to 7 conversion. Pro's? Con's?

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Anonymous
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Ch 13 to 7 conversion. Pro's? Con's?

Hello everyone,

I am trying to find out some information about bk conversion for my mother-in-law.  She filed for chapter 13 in Dec 2019 after having her income cut in half. She kept her car and home and made full payments to the trustee like clockwork up until September 2020. That month she became seriously ill and was unable to continue working. She has made a partial payment every month since however, enough to cover mortgage payment and car payment at least. But she is of course now in arrears and the situation is not going to change.  Also, her vehicle recently threw a rod and now requires around $8000 to replace the engine (2015 Kia Optima with 110k miles,$525/mo payment financed w/CapOne).

 

We found out about and talked with her original bk lawyer about converting your bankruptcy from chapter 13 to 7.  They sent her the form and I understood from reading about it online there is a $25 conversion fee and that's it. For reference, the court is for the southern district of Mississippi. The hope is that will discharge her remaining debt from the chapter 13 filing, remove the Kia from the equation from the car note to having to worry about coming up with thousands to fix the car, and also let her keep her home.  She has no new debt since filing the chapter 13.  I believe she will pass the means test, if the court for SDMS requires her to pass.

 

Has anyone here done something like this before? Any advice, insight, or info would be incredibly appreciated.  Thanks!

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jmw1
Frequent Contributor

Re: Ch 13 to 7 conversion. Pro's? Con's?

Is there any non-exempt equity in the home?  Home prices have gone up a lot and the chapter 7 trustee will not let her out of the 7 without losing the house if the homestead exemption doesn't sufficiently cover the home. In a 13, she would have kept the non-exempt equity as long as she paid the non-exempt amount to unsecured creditors. 

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