Switching From Chapter 13 to a Chapter 7 Bankruptcy

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It is not unusual for a debtor to decide after his Chapter 13 bankruptcy has been confirmed to convert to a Chapter 7 bankruptcy.  The most common reasons a debtor might decide to switch from a Chapter 13 to a Chapter 7 are: 

  • A decrease in income; or
  • An increase in monthly expenses. 

Whether a Chapter 13 debtor has experienced a decrease in income or an increase in monthly expenses, such changes can impact his ability to make his Chapter 13 plan payments and his post-petition mortgage payments. 

Who Can Convert from a Chapter 13 Bankruptcy to a Chapter 7 Bankruptcy?

A Chapter 13 debtor may convert to a Chapter 7 bankruptcy case as a matter of right.  Moreover, the bankruptcy trustee or a creditor may request that a Chapter 13 case be converted to a Chapter 7.  The trustee or a creditor will typically request that a Chapter 13 case be converted to a Chapter 7 if it appears that the debtor’s proposed Chapter 13 plan is not feasible. 

The Process for Converting from Chapter 13 to Chapter 7

To convert to a Chapter 7 case, the debtor must file a Motion to Convert or a Notice of Conversion with the Clerk of the Bankruptcy Court. The conversion becomes effective immediately upon the filing of the Notice of Conversion. The Notice of Conversion must be accompanied by: 

  • An additional filing fee of $15.00 which is the difference between the $284.00 filing fee for a Chapter 13 case and the required $299 filing fee for a Chapter 7 case;
  • The Statement of Current Monthly Income and Means Test Calculation;
  • A Statement of Intention; and
  • A supplemental schedule of debts arising since the Chapter 13 case was filed. 

The debtor is not required, however, to file a supplemental schedule of assets because any property or increase in property value acquired after the original Chapter 13 filing does not become property of the Chapter 7 bankruptcy estate.  The exception to this rule is for instances where the bankruptcy court determines that the debtor converted to Chapter 7 in bad faith.  In such cases, the bankruptcy court may order that all property acquired after the Chapter 13 case was filed become property of the Chapter 7 estate. 

After the Notice of Conversion has been filed, a Chapter 7 Meeting of Creditors will be scheduled.  The debtor’s attendance at the Meeting of Creditors is mandatory. 

Getting Legal Help

If a debtor with a confirmed Chapter 13 cases experiences a decrease income or an increase in expenses which impact his ability to carry out his Chapter 13 plan, he should contact his bankruptcy attorney immediately.  His bankruptcy attorney will review his situation and advise him or whether he should convert to a Chapter 7 or dismiss the Chapter 13 case.

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