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Converting bankruptcy chapters

When individuals or couples in Florida find themselves overwhelmed with debt, they often consider bankruptcy. While this option is not for everyone, it can offer people in financial trouble the opportunity to receive a fresh financial start and stop creditor harassment.

Consumer bankruptcy in the United States is generally offered under one of two plans: Chapter 7 and Chapter 13. In a Chapter 7 bankruptcy, the debtor turns over his or her non-exempt assets to be sold with the proceeds going to creditors. The debtor’s remaining debts are then discharged.

In a Chapter 13 bankruptcy, the debtor is able to keep his or her property but agrees to a court-supervised debt repayment plan that lasts three or five years. Individuals who own their own homes or other high-value property often opt for Chapter 13 to avoid having their real estate and other possessions liquidated. One important qualification for this type of bankruptcy is that the debtor must have a source of regular income so that he or she can make plan payments in a timely fashion.

In a Delaware court case, a couple attempted to convert their Chapter 7 bankruptcy to a Chapter 13 at the last minute in hopes of retaining the title to a property. When the couple filed Chapter 7, both spouses were not employed, though the request for the conversion indicated that the husband had later gotten a job. The court eventually rejected their attempt to convert the bankruptcy, noting that debtors don’t have an automatic right to a conversion, and the court was concerned that the conversion was being requested in bad faith.

Bankruptcy is a serious undertaking and may require legal advice. Debtors may benefit from speaking with an experienced bankruptcy lawyer who may be able to review their situation and offer suggestions on an appropriate strategy.

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