US Supreme Court Considers Question Of When A Debtor Can Convert To Chapter 13
Last week, the U.S. Supreme Court heard oral arguments in Marrama v. Citizens Bank of Massachusetts. The case asks the question of whether a debtor can convert their Chapter 7 Bankruptcy filing to a Chapter 13 Bankruptcy filing.
Marrama had initially filed for Chapter 7 Bankruptcy, but he tried to change his filing to Chapter 13 to preserve $85,000 worth of interest in a piece of property. Citizens Bank of Massachusetts opposed the conversion and a bankruptcy court agreed with the bank. Citizens Bank said that by purposely trying to hide the trust that held this piece of property, Marrama shouldn’t be allowed to convert his petition now to save the asset. The bankruptcy panel agreed with the court’s decision, as did the U.S. Court of Appeals for the Fifth Circuit.
Chapter 7 Bankruptcy (also called Liquidation Bankruptcy):
· Cancels the debtor debts; generally, the court will have to liquidate certain assets if it benefits the creditors.
· To qualify for Chapter 7 Bankruptcy, the debtor’s current monthly income (your average income over the last six months before you file) must not be higher than their state’s median income; they must also prove that they cannot pay back at least $6,000 of their debt over a five year period (In California, the median for a single earner is $43,107. The median for a family of four is $70,172).
· Costs $299 in filing and administrative fees, and commonly requires only one trip to the courthouse.
Chapter 13 Bankruptcy (also called Reorganization Bankruptcy or the Wage Earner’s Bankruptcy):
· Debtor uses income to pay some or all debts over a three to five year time period.
· Debtor must prove to the court that they can meet all payment requirements in order to qualify for Chapter 13 Bankruptcy.
· A business cannot apply for Chapter 13 bankruptcy, but a business owner can file for Chapter 13 bankruptcy as an individual.
· The filing fee for Chapter 13 Bankruptcy is $274.
Bankruptcy papers are signed under penalty of perjury, so it is important to disclose all important information and not hide or lie about anything. Withholding or lying could lead to the dismissal of your case.
When filing for bankruptcy, it is important that you:
· List every creditor.
· List any income that may be coming to you. This includes: stock options, inheritance, trust funds, pensions, tax refunds, annuities, life insurance, retirement funds, judgments from lawsuits.
Being arrested for fraud could lead to prison time.
Sagaria Law, P.C. handles Chapter 7, 11, and 13 Bankruptcy Cases in Alameda County, Santa Clara County, and Monterey County. If you are considering filing for bankruptcy and you need legal advise, contact Sagaria Law, P.C. for a free consultation.
Supreme Court Hears False Arrest, Bankruptcy Cases, Jurist.com, November 6, 2006
Court Quiet A Year After New Bankruptcy Law, Ocregister.com, October 14, 2006
Chapter 7 Bankruptcy, Nolo.com
Chapter 13 Bankruptcy, Nolo.com
Marrama v. Citizens Bank of Massachusetts, Duke Law
Related Web Resource:
Marrama v. Citizens Bank of Massachusetts, Supreme Court Oral Arguments Transcript (PDF)
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