People who have excessive debts often have the option of seeking relief via bankruptcy. There are numerous factors that weigh into whether Chapter 7 or 13 bankruptcy is appropriate, and parties generally determine under which Chapter they will seek relief from their debts based on such factors. Parties can convert their bankruptcy from one Chapter to another, but only if they can demonstrate their eligibility under the new Chapter. The eligibility requirements for a Chapter 13 bankruptcy were the topic of a recent opinion issued in a California case in which the court denied the debtor’s petition to convert his bankruptcy from a Chapter 7 to a Chapter 13. If you need assistance managing your debts, it is advisable to speak to a trusted California bankruptcy lawyer about your options.
The History of the Case
It is reported that the creditors sued the debtor, alleging he defrauded them with regards to a real estate investment in China. Following a bench trial, a California court issued a Statement of Decision in which it found in favor of the creditors and entered a judgment in their favor. The debtor filed a Chapter 7 bankruptcy petition the day after the Statement of Decision was filed. He later moved to convert to a Chapter 13 bankruptcy. The bankruptcy court denied his petition, and he appealed.
Converting a Chapter 7 Bankruptcy to a Chapter 13
Pursuant to the Bankruptcy Code, a Chapter 7 debtor may move to convert his or her bankruptcy to a Chapter 13 at any time, as long as the case was not previously changed to a Chapter 7 bankruptcy. The debtor must be eligible for Chapter 13 debt relief under the provisions of the Bankruptcy Code in order to convert to Chapter 13, however. Bankruptcy Code 109(e) defines who is eligible for relief under Chapter 13, and the debt limits set forth under that provision are strictly construed. Continue reading