Converting a Chapter 13 to a Chapter 7 Bankruptcy

Bankruptcy fees involved with converting from Chapter 13 to Chapter 7 bankruptcy typically total $25. However, some may choose to dismiss a Chapter 13 bankruptcy and re-file under Chapter 7. In this case, the fee to file is $299, including $245 filing fee, $39 administrative fee, and a $15 trustee surcharge.

Voluntary Conversion

Debtors that have filed Chapter 13 have the right to convert to Chapter 7 as long as he has not received a Chapter 7 discharge within the last eight years. The debtor files an “ex parte” motion with the court by filling out a customary form. At the point of filing, all money paid to the Chapter 13 trustee not yet distributed to creditors is returned to the debtor, less expenses.

In most cases, the same bankruptcy forms from the Chapter 13 filing are applicable to the Chapter 7 filing. Within 30 days after conversion, an additional form, the Statement of Intention, must be filed. The Statement of Intention shows the court what the debtor plans to do with secured debts.

Debts incurred after filing Chapter 13 may be included in the Chapter 7 filing in some courts. Debtors should carefully consider whether new debts are secured with assets may be lost by the Chapter 7 filing.

Forced Conversion

A forced conversion to Chapter 7 may be required by the bankruptcy court if the debtor fails to comply with the court’s requirements. Typically, failure to make timely payments under the Chapter 13 reorganization plan compels the court to review the case for dismissal or conversion. If the court believes the debtor did not act in good faith, the court may dismiss the Chapter 13 case and allow creditors to resume collection efforts.

Dismissal and Re-Filing

Some debtors may choose to dismiss the Chapter 13 bankruptcy case and re-file for Chapter 7. While the fee is substantially higher to do so, this method requires debtor’s creditors to file new claims. Debtors may use this method in hopes that creditors do not file claims. This may increase the remainder to be returned to the debtor after dispersions to creditors are made. For example, if a debtor has nonexempt assets worth $120,000 and creditors file proofs of claim totaling $90,000, the debtor keeps the remaining $30,000.

If you are considering bankruptcy, contact a qualified attorney in your state. An attorney specializing in personal bankruptcy can assist in choosing the best option for your situation.