Can a Chapter 13 Bankruptcy Be Converted Into a Chapter 7 Case?

Posted on in Bankruptcy

b2ap3_thumbnail_shutterstock_1739271026.jpgIn consumer bankruptcy cases, debtors generally will choose from one of two options. A Chapter 7 bankruptcy will allow a person’s debts to be discharged (eliminated), but they may be required to turn over certain assets, and if they have any secured debts (such as a home mortgage or auto loan), the collateral used to secure these debts may be repossessed. For those who do not qualify for Chapter 7 or who wish to avoid the loss of certain assets, Chapter 13 bankruptcy may be the preferred option. In these cases, certain debts will be consolidated into a repayment plan, and the debtor will be required to make monthly payments toward this plan for three or five years. Unsecured debts included in the repayment plan will be discharged once all payments have been made. A multi-year repayment plan can be a significant commitment, and circumstances may arise that may affect a debtor’s ability to complete their plan. In these cases, debtors will want to determine their options, which may include converting their case into a Chapter 7 bankruptcy and receiving a discharge of their debts.

Reasons to Convert a Bankruptcy From Chapter 13 to Chapter 7

Once a Chapter 13 repayment plan has been confirmed in bankruptcy court, a debtor will be required to make all payments in the plan. If a debtor fails to make any payments, this may result in a dismissal of their bankruptcy case. Following a dismissal, the debtor will owe the full amount of their debts, and creditors may begin taking action to collect what is owed.

If a debtor encounters financial problems that could potentially result in the dismissal of their bankruptcy case, they will want to address these issues promptly. If a person loses their job and cannot earn enough income to make ongoing payments on their Chapter 13 repayment plan, they may seek to convert their bankruptcy to Chapter 7 and receive a discharge of their debts. A debtor may also decide to pursue a conversion if the reasons they chose Chapter 13 no longer apply. For example, if a person was looking to avoid the loss of their home, but their lender has foreclosed on the property because the debtor was unable to make mortgage payments, converting to a Chapter 7 bankruptcy may allow the debtor to eliminate their debts and receive a fresh start.

To convert to a Chapter 7 bankruptcy, a person will need to make sure they meet the eligibility requirements. They must pass the means test showing that their income is below the median income in their state for their household size. They may also be required to turn over certain types of non-exempt assets before their debts can be discharged.

Contact a U.S. Consumer Bankruptcy Lawyer

The bankruptcy process can be complicated, and to ensure that your rights will be protected and that you will be able to utilize the options available and receive relief from your debts, you will need to work with an experienced lawyer. If you have questions about converting your bankruptcy from Chapter 13 to Chapter 7, a United States bankruptcy attorney can provide the legal help you need.



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