How will Converting to a Chapter 7 Affect My Bankruptcy Case?

Many debtors that simply cannot manage their finances anymore end up filing for bankruptcy. Unfortunately, many aren’t prepared with much knowledge of the procedures, and end up filing for a Chapter 13 bankruptcy instead of a Chapter 7. Furthermore, some of those who file for Chapter 13 bankruptcy aren’t aware that they won’t be able to make the Chapter 13 plan payments at the same time they are obligated to make car or mortgage payments as well. As such, in some cases, a chapter 13 will be converted to a chapter 7, so it is important to understand the chapter 7 process.

Converting from a Chapter 13 to a Chapter 7

There is one major eligibility requirement when trying to alter your filing:

• The court will not allow you to alter a filing that has once been altered already.
• Other than that, anyone who has filed for bankruptcy has the right to change their filing as soon as they come to the realization that a different type of filing suits their needs better.

There is also a cost involved when attempting to convert a Chapter 13 to a Chapter 7. This comes from the filing fee for the Notice of Conversion. Your attorney can prepare you for the cost involved with filing this motion, and file the motion for you through the right channels as well.

Furthermore, to convert from a Chapter 7, you must meet the income requirements for a Chapter 7 bankruptcy. This means your income must be below the state median or you must show you can't afford your Chapter 13 payments and a comfortable standard of living.

There will be a formal meeting of creditors before your conversion will take place, and it’s definitely in your best interest to be a part of this meeting. This is your creditor’s opportunity to contest the conversion of your bankruptcy.

The Effect of Conversion

The reason your creditors may  object the conversion of your bankruptcy from Chapter 13 to Chapter 7 is generally because of the fact that, while a Chapter 13 bankruptcy requires all creditors to be repaid of the debt through a payment plan, a Chapter 7 bankruptcy absolves the  debtor from being responsible to the creditors. 

Getting Help 

If you are considering converting your bankruptcy, or if you are at all confused about any aspect of the bankruptcy process, it is vital to hire a qualified lawyer. Your attorney will be able to file the necessary motion to alter your Chapter 13 to a Chapter 7, and can provide you with guidance and advice throughout the bankruptcy.