Can we convert our case to a Chapter 7?
I met with a client a couple days ago because she wanted to convert her case to a Chapter 7. The stay was lifted on her house and they no longer had anything to pay through the bankruptcy. Before the appointment was set, my paralegal asked them if they had a change in income and expenses. They said no that everything was the same. Assuming everything was the same or had changed very little, they would have qualified for a Chapter 7.
When her and her husband came to my office and provided me with their current pay stubs, both of them were making more money. Her husband gets paid weekly and his checks went up anywhere from $150 to $300 a week. She has also received a raise of about $150 every two weeks. On top of that, some of their expenses had gone down since they no longer have the house and are now living in an apartment. After going over all their expenses and income I discovered they do not qualify for a Chapter 7.
They filed under the old law, and had a disposable income (Net income – expenses) of over $800. I then found out they had some IRS debt from ’05 and probably some from ’06 (they hadn’t filed yet). I explained that since they can’t convert their case to a Chapter 7, the best thing for them to do would be to modify their plan and include the IRS debt in the bankruptcy. I explained they could either pay the IRS debt off through the Trustee and get a discharge once it is all paid off or they could let their case get dismissed and pay the IRS and all their unsecured creditors on their own.
I understand she was a little upset since she thought she would be able to convert her case to a Chapter 7, but I explained that she was told she could probably convert and needed to speak with an attorney and that my paralegal could not tell her if she qualified for sure or not. Plus, when she talked to my paralegal she was only going off the information provided by the debtor. How was she to know that their income and increase significantly and their expenses has decreased unless the client told her. We can only provided advice based on the information given. It is not our fault if we are given inaccurate information and therefore give misleading advice.
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