. . . and the world of bankruptcy law is no exception. The latest example of governmental ineptitude follows.
First, a bit of background. You may already know that you can file Chapter 7 bankruptcy only once every eight years. Perhaps you think that once is enough and for most people it is. However, sometimes families are hit hard with large uninsured medical expenses. Sometimes, these large uninsured medical expenses are compounded by the debtor’s inability to work due to the medical problem at hand. For example, a father of four, with a job that doesn’t offer medical coverage, has a heart attack. Two bypasses and six months of rehabilitation later, he owes the hospital and the doctors over $100,000. However, he filed bankruptcy only six years ago and isn’t eligible for Chapter 7 for another two years. Meantime, the creditor sharks are circling. (And of course, because he had no insurance, the hospital charged the debtor four times what he should have been charged. But that’s a subject for another day.)
Even though he cannot file Chapter 7 bankruptcy because the eight year time frame hasn’t run, he can still file Chapter 13 when he gets back to work. This enables him to prevent wage garnishments while making a very low monthly payment to a bankruptcy trustee.
But what happens if he loses his job, say, two years into the Chapter 13 bankruptcy plan? Now his case is in jeopardy of dismissal because he can’t pay the bankruptcy trustee anymore.
The question becomes: Can the Chapter 13 case be converted to Chapter 7? It has now been eight years since his first Chapter 7, however the Chapter 13 case originally was filed only six years after the Chapter 7.
Now, here’s the exercise in futility courtesy of the geniuses in Congress and in the US Trustee’s Office. This unfortunate debtor CANNOT convert to Chapter 7 which would be the simplest, most cost-effective solution, saving the debtor money and saving judicial resources on the federal level.
Instead, the debtor must simply wait until the Chapter 13 is dismissed, then file a new Chapter 7 case at substantial additional expense. Meantime, the courts are required to use their resources to administer a new case all over again.
Yes, dismiss and re-file the case, instead of simply converting the Chapter 13 bankruptcy to Chapter 7. The federal bureaucracy at its finest.