How is Your Home Equity Handled When You Convert Your Chapter 13 to a Chapter 7 Bankruptcy?

TRI Writer • September 30, 2020

Sometimes Chapter 13 bankruptcy petitioners experience a significant life change during their three or five year Chapter 13 bankruptcy payment plan and need to modify their monthly plan payments. Modifying your Chapter 13 bankruptcy monthly payment amount is possible. Still, there are also times when a Chapter 13 bankruptcy no longer works for the petitioner, and Chapter 13 needs to be converted to Chapter 7 bankruptcy. When a significant life change requires changing a Chapter 13 to a Chapter 7, many petitioners worry about their home.

Will You Lose Your House If You Convert Your Chapter 13 to Chapter 7?

How your home will be handled when converting from Chapter 13 to Chapter 7 bankruptcy depends on the amount of equity. Your primary residence is real property, and the trustee may sell any real property with excess equity to pay unsecured creditors. This leaves many Chapter 13 bankruptcy petitioners who face significant life changes hesitating to seek help about converting to Chapter 7 bankruptcy.

Consult with a Bankruptcy Attorney About Converting as Soon as Possible:

If you are struggling to make your Chapter 13 bankruptcy payments or you have experienced a significant life that will make it hard or impossible to continue making the payments you agreed to in your Chapter 13 bankruptcy , contact an experienced Tennessee or Georgia bankruptcy attorney as soon as you can. Your Chapter 13 bankruptcy hinges entirely on your ability to make on-time monthly payments for the full three or five-year plan. Don’t wait until you have missed a payment. Contact a bankruptcy attorney for help immediately.

But Is Your House in Danger if You Convert to Chapter 7 Bankruptcy?

The easy answer that’s not so easy to accept is: maybe. It all depends on the equity in your home. You may have filed Chapter 13 because you had far too much equity in your home to file Chapter 7 without losing your home. In this case, converting to Chapter 7 will mean losing the house. In some Chapter 13 conversion cases , the petitioner’s house’s equity is protected because the equity  increased since they initially filed Chapter 13 bankruptcy. Regardless of how or why the equity is there, your Chapter 7 bankruptcy trustee has a job to do, and they will do it. But failing to make your Chapter 13 bankruptcy plan payments may have eerily similar results without the benefit of any discharge of debt.

If you are worried about converting your Chapter 13 bankruptcy to Chapter 7 bankruptcy, we can help. Most bankruptcy offices in the Chattanooga area don’t have a single Consumer Bankruptcy Specialist on staff. Ken Rannick is a Senior Consumer Bankruptcy Law Specialist. Please get in touch. You are in good hands with Ken Rannick and Kenneth C. Rannick P.C.

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Subchapter 5 Bankruptcy: Unlocking New Possibilities for Tennessee Residents

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Are you a Tennessee resident facing financial challenges and considering bankruptcy? If so, you may have heard about a relatively new option called Subchapter 5 bankruptcy. But what exactly is Subchapter 5 and how does it differ from traditional Chapter 11 bankruptcy? More importantly, what benefits does it offer to individuals and small businesses?  In this blog post, we will explore the world of Subchapter 5 bankruptcy and shed light on its advantages for Tennessee residents. Whether you're a struggling entrepreneur or an individual burdened by overwhelming debt, understanding the potential benefits of Subchapter 5 can help you make informed decisions about your financial future. What is Subchapter 5 Bankruptcy? Subchapter 5 is a relatively recent addition to the United States Bankruptcy Code, specifically designed to provide a streamlined and cost-effective bankruptcy process for small businesses and individuals. It was created as part of the Small Business Reorganization Act (SBRA) in 2019, with the aim of increasing accessibility to Chapter 11 bankruptcy relief. The Benefits of Subchapter 5 Bankruptcy Simplified Process: One of the key advantages of Subchapter 5 is its simplified and faster bankruptcy process. Unlike traditional Chapter 11 bankruptcy, which can be complex and costly, Subchapter 5 offers a more streamlined approach that is better suited for small businesses and individuals. Retention of Ownership: Under Subchapter 5, business owners have the opportunity to retain ownership and control of their company while developing a repayment plan. This allows for greater flexibility and the ability to restructure debts without losing ownership interests. Reduced Plan Requirements: Subchapter 5 eliminates certain stringent plan requirements that are typically associated with traditional Chapter 11 bankruptcy. This simplification of the plan process makes it more accessible to small businesses and individuals. Debt Repayment Plan: Subchapter 5 allows for the development of a debt repayment plan based on the individual's or small business's disposable income. This plan spans over three to five years, making it more manageable and achievable for debtors. Creditor-Friendly Approach: Subchapter 5 encourages creditor participation and collaboration, promoting consensual resolutions and a more amicable environment. This can lead to increased cooperation, reduced litigation costs, and ultimately, a more successful restructuring process. Subchapter 5 vs. Chapter 11 Bankruptcy: Understanding the Difference While both Subchapter 5 bankruptcy and traditional Chapter 11 bankruptcy share some similarities, there are significant differences between the two. The primary distinction lies in the complexity, cost, and requirements associated with each option. Subchapter 5 offers a more simplified and accessible bankruptcy process specifically tailored to the needs of small businesses and individuals, while Chapter 11 is better suited for larger businesses with more complex financial structures. If you're a Tennessee resident grappling with financial difficulties, Subchapter 5 bankruptcy may provide a viable solution. Its streamlined process, reduced plan requirements, and debtor-friendly approach make it an attractive option for small businesses and individuals seeking relief from overwhelming debt. Before making any decisions, it's essential to consult with a qualified bankruptcy attorney who can guide you through the process and help determine the best course of action for your specific situation. Remember, bankruptcy is not a one-size-fits-all solution, and the outcome will depend on various factors. However, understanding the potential benefits of Subchapter 5 bankruptcy can empower you to make informed decisions about your financial future. At Kenneth C. Rannick, P.C., we specialize in bankruptcy law and can provide the guidance and support you need during challenging times. Contact us today to schedule a consultation and explore your options for a fresh start. Take control of your financial future with Subchapter 5 bankruptcy. Let us help you navigate the path to a brighter tomorrow.

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