Switching to a Different Type of Bankruptcy

The type of bankruptcy you choose to file has a significant impact on your case – it affects not only what kind of property you will be able to hold onto but also how many payments you will be making and for how long.

One question that we, as Jacksonville, Florida bankruptcy attorneys, will sometimes receive is: Is it possible to switch between the different types of bankruptcies if your circumstances change? While the process of switching between types of bankruptcies can be complicated, it can be done with the assistance of the right attorney.

Chapter 7 and 13 Bankruptcy: Distinctions

First, we will provide a breakdown of what each type of bankruptcy involves: Chapter 7 bankruptcy, also known as “liquidation,” involves your assets being broken down into exempt and non-exempt assets pursuant to state law, where non-exempt assets are liquidated in order to satisfy creditors’ claims. In Florida, if you have equity in your home, the state homestead exemption allows you to keep it under Chapter 7 bankruptcy. Chapter 7 also wipes out such unsecured debts as credit cards and medical bills.

It is also important to note that in order to file for Chapter 7 bankruptcy in Florida, you must have little-to-no disposable income, where non-exempt property is sold by the Chapter 7 trustee in order to pay off at least some of the debt. That being said, if you do not own any non-exempt assets, your creditors will not be able to collect.

Conversely, Chapter 13 bankruptcy involves more of a reorganization plan, whereby you restructure and pay off your debts over a period of three to five years. Filing for Chapter 13 bankruptcy requires that you have a steady source of income, whereby your payments depend upon your income, and where you have disposable income, it is paid to the bankruptcy trustee for the duration of your repayment plan. You can also continue to make mortgage and car payments throughout the duration of your plan.

Both types of bankruptcy feature the protection of a stay on collection efforts, whereby you cannot be harassed by creditors for payments. In addition, any and all foreclosure and repossession efforts must cease as well. Instead, any and all collection efforts must go through the court/bankruptcy process.

Switching From One to Another

Some do decide to switch between the two bankruptcies. One reason might be, for example, to switch from Chapter 13 to Chapter 7 because the latter is faster, and you end up paying less overall at the end of the Chapter 7 process. In addition, some find that they need to make the switch given the type of property they want or need to hold onto: With Chapter 7, you can keep your home if you stay on top of your mortgage payments, as well as any other types of exempt property. Conversely, Chapter 13 allows you to make up any mortgage arrears through the payment plan, and you don’t lose any property at all.

Contact Our Jacksonville, Florida Bankruptcy Law Practice for Assistance

You have the ability to convert between the two at least once as long as it is in good faith. If you live in Jacksonville, Florida, or any surrounding area of Florida, and you have questions about bankruptcy, we are here to help. Contact us today to schedule a free consultation and find out more.