Sacramento Bankruptcy: What is a Bankruptcy Conversion?

Bankruptcy conversion is changing the chapter of your bankruptcy filing after you have already filed. Types of bankruptcy are organized by chapters of the federal law that created them. Though there are many types of bankruptcy chapters, the most common for consumers are Chapter 7 and 13. Other areas of this website address all of the differences between Chapter 13 and 7 bankruptcies. But for this issue, suffice it to say that you repay at least some of your debts in a Chapter 13 (bankruptcy reorganization), but none in a Chapter 7 (bankruptcy liquidation).

If you file for one type (or chapter) of bankruptcy and, later, decide to do another before your case is complete, you can convert your bankruptcy. This means that you change your case from one form of bankruptcy filing to another without having to refile your case. Much of the information in your new bankruptcy chapter will have to be provided after you convert. But you won’t have to refile another case to do it.

Refiling a bankruptcy often comes with a penalty. To prevent people from filing too many bankruptcies, particularly in quick succession, Congress imposed restrictions on later filings to inhibit them. If, for whatever reason (and there can be many), you do need to refile a bankruptcy, it can be done. Usually, too, there is no penalty for doing so, especially if the cases are spread broadly over time. But if someone files bankruptcy 3 times in year, there likely would be problems. By being able to convert your case, you eliminate possible problems with future bankruptcy needs.

Converting your bankruptcy can also save you money. Instead of having to refile a brand new case with a brand new filing fee, you only have to pay a conversion fee, which saves you hundreds of dollars.

Most importantly for a conversion, it gets you where you want–or need–to be. For example, if you are in the midst of a Chapter 13 bankruptcy reorganization and can no longer afford your plan payments, you may need to convert to a Chapter 7 liquidation. Bankruptcy conversion laws allow you to do this. Loss of a job or other financial obstacles that can prompt a bankruptcy filing can also prompt a bankruptcy conversion.

Allowing for conversion also allows filers the freedom of flexibility. They know that if something changes for them that prevents them from one form of bankruptcy filing may allow them bankruptcy protection and benefit in another. So if you are trying to repay a portiImage result for job loss bankruptcyon of your debt in a Chapter 13 bankruptcy but, because of a job loss, can no longer do it, you can convert your case to Chapter 7 and still discharge your debt.

Conversion is one of many tools available in a bankruptcy filing. Bankruptcy should never be this frustrating. And it is a good option within a bankruptcy if you need it.

Bankruptcy Credit Counseling

Bankruptcy credit counseling is a requirement of the bankruptcy system. It mandates that someone who files bankruptcy must undergo credit counseling before filing bankruptcy and, again, after filing but before the bankruptcy is discharged. It is not difficult to do, nor is it expensive. But it must be done.

Unless bankruptcy credit counseling is obtained before filing, you are not eligible to file. And if you don’t get a second credit counseling session after you file, you won’t receive a discharge. It is a must in the bankruptcy filing process since Congress imposed it as a requirement in 2005.

The purpose of pre-filing bankruptcy credit counseling is to alert consumers to possible bankruptcy alternatives before they file. Almost never, though, are other options besides bankruptcy recommended in the counseling process. That’t because people filing bankruptcy cannot afford their debts, which is why they have begun the bankruptcy process. But if they could, bankruptcy credit counseling could reveal that possibility. Even if you know bankruptcy is your only option, you must still undertake pre-filing bankruptcy credit counseling.

After you have filed, but before your case can be concluded with a discharge, you must take a second credit counseling session commonly called debtor education. Debtor education does just what it says. It educates debtors on debt, financial considerations and budgeting. All this is an effort to counsel the consumer to avoid future financial failings. Though bankruptcy is not always brought on by financial fault, debtor education bankruptcy credit counseling seeks to avoid that future potential.

Cost for bankruptcy credit counseling varies. Typically credit counseling sessions cost less than $25. Upon completion of credit counseling, a certificate of completion is issued. I file these forms for you to reflect completion of your bankruptcy credit counseling requirement.

I have links to a couple of bankruptcy credit counseling companies on my site that I have worked with. There are hundreds of others, though. It makes no difference which one you use, so long as it is approved by the United States Department of Justice. I have never heard of a credit counseling company of agency that isn’t so approved. But here is a link to the Justice Department’s approved list just in case you have concerns.

Bankruptcy and Student Loans

Bankruptcy does not normally allow for the discharge of student loans. Only under an extreme hardship can a student loan be discharged. These guidelines give the degree of difficulty of eliminating student loans through bankruptcy. Unemployment and other debt obligations will rarely do the trick to discharge a student loan through a bankruptcy. As I have mentioned to clients over the years, you wouldn’t want the hardship it takes to qualify for the elimination of student loans in a bankruptcy.

Efforts have been made to allow the elimination of student loans in bankruptcy. But, to date, nothing has changed. The Youtube video below presents a picture of the efforts made to make student loans more likely to be discharged through a bankruptcy filing.

What, then, to do? Your best bet is to eliminate all the debts you can through bankruptcy if this is your best debt elimination option. Often times getting rid of other debt will allow you to manage your student loans.

Whether you might qualify for student loan hardship allowing you to eliminate your student loans in a bankruptcy is a factual analysis. Since student loans are often the biggest consumer debts, a free consultation to determine whether student loans can be discharged is well worth the price!

Medical Bills and Bankruptcy

Medical bills are the prime factor for filing bankruptcy in the United States. According to the Huffington Post, as well as numerous other sources, it is the main reason.

Medical bills prompt bankruptcy filings for a variety of reasons, not the least of which is the high price of medical care cost in America. Insurance availability is another ingredient. Though Obamacare has created more coverage in years past, costs have escalated, as have co-payments. The end result is more medical care debt income to cover it.

Medical care is not optional. At least it shouldn’t be. But in America it often is. Faced with the dilemma between medical care and unaffordable expense, bankruptcy may be a necessity. Bankruptcy can deal with medical care debt. But neglected medical care has no cure.

Medical care costs frequently overshadow other financial obligations which, in turn, can cause even further debt. Using credit cards to pay for medical care has become increasingly common. CareCredit is a credit agency devoted to medical care costs and treatment.

Medical care costs, too, often come with aggressive collection tactics. While it does not seem fair, often the most aggressive collection companies and agencies represent medical care providers.

Bankruptcy is an option to avoid your medical care costs and associated debts. Medical care costs and debts taken out to cover such debts are entirely dischargeable in bankruptcy. While there is seemingly no safety net for medical care, at least there is one for the associated debt.