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Can I file for chapter 7 if I can no longer make my payments under a chapter 13 plan?

Posted on Dec 19, 2013 in Bankruptcy, Chapter 7, Wisconsin

We filed a chapter 13 bankruptcy case for a couple we’ll call Larry and Laura.  This allowed them to pay their debts off with one monthly payment over a period of 5 years.  But things went south for them.  Larry lost his job and one of them had to go to the hospital. The co-pays and deductibles were more than they could handle.  They could no longer afford to make chapter 13 payments.  But they still wanted to get out of debt.  So we decided together to convert, or switch, their case to a Chapter 7 even though they weren’t eligible to file for chapter 7 when we first met them. That’s because they were making enough money back then that the Bankruptcy Code would call their case an “abuse” under the “means test”.

The US Trustee didn’t like Larry and Laura’s idea to discharge their debts in chapter 7.  That’s because they used to afford a chapter 13 case and five years’ worth of payments.  The US Trustee thought it was Larry’s fault he lost his job and that they couldn’t pay their hospital bills.

We help people file for bankruptcy in chapter 7 and for bankruptcy in chapter 13.  We help individuals and married couples determine what kind of bankruptcy is right for them.  If you are eligible for chapter 7, we help you file for immediate relief.  If you are eligible for chapter 13, we help you figure out the lowest payment you are legally required to pay.

Whenever we file a bankruptcy, the Office of the United States Trustee, a part of the Justice Department, reviews the bankruptcy paperwork.  What does the US Trustee’s office do?  The US Trustee’s job acts as a gatekeeper and make sure that filers are entitled to a “discharge” of debts in bankruptcy.  The office also reviews the “means test” and other schedules to see if Chapter 7 filers should be in Chapter 13.  Sometimes, they believe someone doesn’t deserve a bankruptcy discharge and in even extreme cases, they will refer cases where people may have committed bankruptcy crimes to be prosecuted by a U.S. Attorney in federal court.

When the US Trustee objected to Larry and Laura “converting” their case from chapter 13 to chapter 7, Lakelaw went into action.

Lakelaw proved to the Milwaukee Bankruptcy Court that Larry and Laura lost income because Larry lost his job.  Not only that, we established the hospitalization was something they didn’t want to happen.  So even through their original income was very generous, it wasn’t enough to pay creditors now.

The Bankruptcy Judge agreed with Lakelaw, so Larry and Laura are now eligible to file for chapter 7 and get a prompt discharge of most of their debts.  The US Trustee’s unreasonable position was defeated.  We did this for Larry and Laura as part of our normal services.  When you hire Lakelaw for your bankruptcy, we advocate for your interests from start to finish. Count on Lakelaw to stand up for you.  The US Trustee acts to fight cases it thinks are wrong, but we fight for people who deserve a bankruptcy discharge.  Call or e-mail us to tell you how we can fight for you.


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