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I can no longer afford my chapter 13 payments, can I drop chapter 13 and file chapter 7?

Pine Bluff, AR |

After a divorce in 2007, I purchased a vehicle and started new consruction on a home. My bills became too expensive for me keep up with which sent me into a financial down fall. I filed chapter 13 in an effort to save my vehicle and get caught up on my bills. My house was still under construction at that time and not included in the chapter 13. I am now living in the home but have not been able to close on the home with the title company due to the chapter 13 case. Can I now file chapter 7 and let the vehicle go in efforts to keep my home?

The bankruptcy court has given me permission to incur a new debt, which is not included in my bankruptcy payment schedule. The mortgage company now requests that the loan amount is reflected in the schedule. By the way, this is a "reconstruction" loan financed through my cites community development program including a $20,000 grant and $86,000 liablility. My children and I have been living in the home for about 1 year now during this process. There is no lien on the property and I still own the land. If the court refuses to comply, will we have to move out? What are my options?

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Attorney answers 2

Posted

You can probably convert your case to chapter 7 assuming there are no assets to liquidate (or you don't mind loosing any assets that can be liquidated). You need to file a new Form B22 showing you qualify for chapter 7. Refling does the same thing, but it is sometimes easier to qualify in a conversion by stating you cannot afford your payments in the chapter 13 case. If you convert or refile you can still keep the truck if you can reaffirm the debt with the lender or otherwise work something out with the lender regarding the delinquent payments. You can always let the vehicle go back to the lender as well. Either stratagy should help with the refinance but you still may have credit problems on the refinance after the chapter 7 is complete. Good luck.

Posted

Dear Sir or Madam,

A debtor may convert a case from chapter 13 to chapter 7 pursuant to section 1307 of the bankruptcy code.
The correct citation is 11 U.S.C. Section 1307(a). I have attached the code section for your convenience.

§ 1307. Conversion or dismissal
(a) The debtor may convert a case under this chapter to a case under chapter 7 of this title at any time. Any waiver of the right to convert under this subsection is unenforceable.

Take care and good luck.

Stephen M. Dunne, Esq.
Dunne Law Offices, P.C.
(215) 854-6342
1500 JFK Blvd, Two Penn Center, Suite 200
Philadelphia, PA 19102
dunnelawoffices@gmail.com
www.dunnelawoffices.com

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