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Can You Convert Chapter 13 to Chapter 7?

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Can You Convert Chapter 13 to Chapter 7?

No matter who you are, bankruptcy can be an incredibly stressful process—but it doesn’t have to be. We understand what it’s like to be drowning in your finances and are here to help. One question we get a lot from many of our clients when they are filing for bankruptcy or have already filed is, “Can I convert Chapter 13 to Chapter 7?” 

Unfortunately, there is no one answer to this question, as it can vary on a case-by-case basis. But we’re here to walk you through it. Below, we’ll cover the various reasons why a person might want to convert to Chapter 7, the benefits of converting, who qualifies to convert, the cost involved, and how the process works. 

If you have any further questions and need help filing a Chapter 13 or Chapter 7 bankruptcy, don’t hesitate to reach out—the team at Sawin & Shea, LLC can assist you. 

For What Reasons Would Someone Convert From Chapter 13 to Chapter 7?

There are a few different reasons why a debtor might need or want to convert Chapter 13 to Chapter 7, including:

  • Their Chapter 13 payment is too high, and they can no longer afford the payment plan.
  • Their situation has changed, and they now qualify for Chapter 7.
  • They are worried their Chapter 13 payment plan will take too long to complete.
  • They are interested in surrendering a property that is protected and saved in Chapter 13.

What Are the Benefits of Converting a Chapter 13 Bankruptcy to a Chapter 7?

Understandably, when considering converting your Chapter 13 to a Chapter 7 bankruptcy, you will want to weigh your options and understand the benefits. And there are indeed benefits to switching your Chapter 13 to Chapter 7. 

  1. The most significant advantage of converting is that a Chapter 7 bankruptcy can be completed more quickly than Chapter 13. A Chapter 7 bankruptcy can result in a discharge of your debts in as little as 120 days. In contrast, Chapter 13 requires you to follow a payment plan that can take 3 to 5 years before the rest of your debt is discharged. 
  1. The second benefit is that Chapter 7 is often cheaper than Chapter 13. With a Chapter 7 bankruptcy, you do not have a payment plan, and your debts will often get discharged upfront. However, with Chapter 13, you must commit to a payment plan, which can cost you more money in the long run. 

It’s important to note, however, that while there are benefits to converting, there are also disadvantages. Though Chapter 13 requires you to commit to a payment plan, it does protect your property. So the downside of converting to Chapter 7 is that it leaves your property vulnerable. 

Chapter 7 is also more strict about what debts you can wipe out, so there is no guarantee that your debt will be eligible for a discharge. It is also much harder to qualify for a Chapter 7 bankruptcy. 

So make sure you weigh these pros and cons before trying to convert. In some cases, it might end up being better for you to stick to Chapter 13. A qualified and experienced bankruptcy attorney can help you make this decision. 

Do I Qualify to Convert My Chapter 13 to a Chapter 7?

When you are interested in converting a Chapter 13 bankruptcy to Chapter 7, you must first pass what is known as a means test to determine if you are eligible. This test looks at your disposable income to determine how much money you have and what you can afford. 

If it is determined that your income is too low for you to continue paying your Chapter 13 payments, you will likely qualify to convert to Chapter 7. In contrast, if your income is too high, you might not qualify.

However, not all bankruptcy courts agree on this process. Some courts do agree that the means test can be used when deciding if a debtor qualifies for conversion to Chapter 7, but some courts do not. So again, qualifying will ultimately be determined on a case-by-case basis and will depend on your jurisdiction. 

A local bankruptcy attorney will be familiar with the courts in your jurisdiction and can better help you determine whether or not you will qualify. 

How Much Does it Cost to Convert Chapter 13 to 7?

The general upfront cost to convert from Chapter 13 to Chapter 7 is not much. If you qualify, you will simply file a “notice of conversion” and will then be asked to pay a conversion fee. The fee for going from Chapter 13 to Chapter 7 is only $25, as this is the difference between the initial filing fee (Chapter 7 = $338 and Chapter 13 = $313). 

However, keep in mind that the final result of your bankruptcy could save you money or end up costing you more, which is why it’s important to weigh the pros and cons. Remember, Chapter 7 could be cheaper in the long run because it can wipe out your debt faster, but it does mean your property could be taken away, which can cost you. 

So ultimately, the total cost of your bankruptcy conversion will depend on your individual situation. But the upfront cost will only be $25 for the conversion fee. 

How to Convert Chapter 13 to 7

When you file for a conversion, you will first file your “notice of conversion” and pay the fee, then you will be assigned a new trustee, and you will also have to attend a 341 hearing (meeting of creditors). 

You will typically not be required to file a new bankruptcy petition, but there will still be other forms you have to complete. These documents include:

  • Reaffirmation agreements
  • Amended schedules
  • Additional creditors
  • Notice of intent

It’s also important to note that your property that was protected in your Chapter 13 bankruptcy will become unprotected and may be used to pay off your debts when you convert. Your new Chapter 7 trustee will potentially sell your property and distribute the proceeds to pay your creditors. This can include your home, your car, or other valuable possessions. 

How Sawin & Shea, LLC Can Help

While converting from Chapter 13 to Chapter 7 can be beneficial, it could also end up costing you more money in the long run. So before petitioning to convert, you should speak with a bankruptcy attorney who has experience handling these kinds of cases. They can answer all your questions and guide you through the best course of action. 

Contact Sawin & Shea at 317-759-1483 or send us an email for a free consultation today!

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