QUESTION

My husband and I earned too much money to file a Chapter 7 bankruptcy. As a result, we filed for Chapter 13. We surrendered our home to the lender and then my husband lost his job. Then our bankruptcy was dismissed because we couldn't make the payments. At that point, why wasn't our bankruptcy converted from Chapter 13 bankruptcy to Chapter 7? What are our legal rights and what should we do? -- Julie

ANSWER

Dear Julie -- Since your husband lost his job, your income may have dropped far enough for you to qualify for Chapter 7 bankruptcy and erase your debt. And since you gave up your home, that shouldn't be a problem in Chapter 7.

In all likelihood, the reason your case wasn't converted to a Chapter 7 bankruptcy was because your incomes at the time you filed were higher than the median income in your state. You see, the law established a means test that dictates which type of bankruptcy you can file. At the time you filed, you couldn't qualify to file a Chapter 7 bankruptcy.

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