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Most people convert 13 to 7 because of the obvious benefit of
eliminating payments. Yet in a few unique circumstances, the best
option is to convert Chapter 7 into Chapter 13. The right to convert
is absolute and cannot be waived, and even if signing a sworn waiver
of rights, the waiver is null and unenforceable.
As a condition of qualification for Chapter 7, all tax returns must
be filed with the IRS covering prior taxable years. All too often,
individual debtors rush to file returns to satisfy this requirement,
only to be later surprised by notice of levy from the IRS while the
bankruptcy case is pending. This levy creates a past due,
nondischargeable claim that may defeat property exemptions. To prevent
the IRS from receiving permission to execute the levy, debtors may
convert their Chapter 7 bankruptcy case to Chapter 13, and include all
past due taxes in the plan. Once a Chapter 13 cases is confirmed, tax
claims, including the past due amount, are considered current by a
irrefutable legal presumption.
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