When filing a personal bankruptcy, you have to choose the bankruptcy chapter that will work best for your situation. Your attorney can help advise you on selecting the appropriate chapter. Although, some debtors are not eligible for filing a chapter 7, and will have to select a chapter 13 filing, others will voluntarily select to file a chapter 13. There are several reasons a debtor may choose a chapter 13 filing over a chapter 7, but once you have decided a chapter 13 is the right choice for you-you will next consider the length of the commitment period.
The applicable commitment period as defined in Section 1325(b)(4) is three years for below-median debtors and five years for above-median debtors. (Your attorney can assist you with determining if you are above or below the median income in your state). The plan must provide “that all the debtor’s projected disposable income to be received in the applicable commitment period…be applied to make payments to unsecured creditors under the plan.” 11 U.S.C. Section 1325(b)(1)(B). Once you have determined that a chapter 13 is appropriate and you have determined the appropriate plan length-you will continue to make your monthly payment until discharge.
But what happens when a debtor’s circumstances change during the length of the plan? There are several options: from the modification of the plan to converting the case from a chapter 13 to a chapter 7. However, there are several pitfalls that a debtor needs to conscientious of when converting a case. Has the debtor filed bankruptcy before-are they eligible for a discharge in a chapter 7, are there still non-exempt assets existing in the case, is there a valid reason for the conversion.
Claims that arise after the commencement of the case, but prior to the conversion, are treated as if they were incurred just before the commencement of the case. Holders of pre-conversion claims, whether the claims arose pre or post-petition are treated equally, and it is the date of the conversion rather than the date of the filing which determines the nature of the claim. This means that pre-conversion debts are dischargeable in a converted case. A discharge “operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived.” 11 U.S.C. Section 524(a)(2). A discharge, discharges the debtor from all debts that arose before the date of the order from relief. 11 U.S.C. Section 727(b).
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Even if a chapter 13 bankruptcy is appropriate for your current situation, if your circumstances change, your attorney can assist you in determining other options during the life of the plan. Contact the attorneys at LifeBackLaw and see us at www.LifeBackLaw.com and let us help you get your life back.
