Not every person suffering financial difficulty is eligible for discharge of debt through all chapters of bankruptcy. An individual filing for bankruptcy works with an attorney and a Bankruptcy Court Trustee, who assess the debtor’s financial wherewithal and options for relief under the bankruptcy laws. Each Consumer Debtor’s case is reviewed against a Means Test to determine eligibility for Chapter 13 or Chapter 7 filings. Under Chapter 13, a portion of debts may be discharged. Also, a creditor (and court) payback system is established to enable the petitioner to make affordable payments over a multi-year period.
In some cases, additional debt may accrue while a bankruptcy case is before the court. Let’s take the case of Mr. Hall. (His name has been changed to protect his privacy.) The fictitious Mr. Hall did not qualify under the Means Test for Chapter 7. During the Chapter 13 bankruptcy proceedings, Mr. Hall became ill, was hospitalized, and accrued additional, significant and unexpected medical debt.
The way to discharge Mr. Hall’s new debt was to first move to convert the pending Chapter 13 filing to Chapter 7. This was allowed because under the new circumstance, Mr. Hall qualified under the means test. Mr. Hall’s new debt was treated in the converted case as if it had been included on the original filing date. Thus, the post-petition medical claims were treated as having arisen immediately before the filing of the original petition, and were eligible for inclusion in his discharge under Chapter 7. As this sample case illustrates, it is possible to convert from one chapter of bankruptcy to another, when new, intervening circumstances warrant it, under terms of the law.