Legal Definitions - chapter-surfing

Chapter-surfing

This informal term describes a situation where an individual or business that has filed for bankruptcy under one specific chapter of the United States Bankruptcy Code later decides to change their filing to a different chapter. The U.S. Bankruptcy Code offers various chapters, each designed for different financial situations and goals, such as liquidating assets (Chapter 7), reorganizing debt for individuals with regular income (Chapter 13), or reorganizing a business (Chapter 11).

• Example 1: Sarah initially filed for Chapter 7 bankruptcy because she had significant unsecured debt and no steady income, hoping to discharge her debts quickly. However, a few months later, she secured a stable, well-paying job. Realizing she could now afford to repay a portion of her debts over time and wanted to keep certain assets that would have been liquidated under Chapter 7, she decided to convert her case to Chapter 13 bankruptcy. This move from Chapter 7 to Chapter 13 is an instance of chapter-surfing.

• Example 2: "Bistro Bites," a local restaurant, filed for Chapter 11 bankruptcy with the intention of reorganizing its finances, renegotiating leases, and continuing operations. After several months, it became clear that the business could not generate enough revenue to support a viable reorganization plan, despite their best efforts. The owners then made the difficult decision to convert their case to Chapter 7 bankruptcy to liquidate the business's assets and close down. This transition from a reorganization chapter to a liquidation chapter for a business illustrates chapter-surfing.

• Example 3: Mark filed for Chapter 13 bankruptcy to create a repayment plan for his debts over five years, allowing him to keep his home and car. Two years into his plan, he suffered a severe medical emergency that resulted in substantial new medical bills and rendered him unable to work for an extended period. With no income to make his Chapter 13 payments, his attorney advised him to convert his case to Chapter 7 bankruptcy, where his remaining eligible debts could be discharged without ongoing payments. Mark's shift from Chapter 13 to Chapter 7 is another example of chapter-surfing.