In cases where you can no longer maintain your Chapter 13 bankruptcy plan payments, your case can be converted to a Chapter 7 and your debts discharged.
Sometimes Chapter 13 debtors need or want to convert their bankruptcy case from a Chapter 13 to a Chapter 7 bankruptcy. And sometimes the bankruptcy court will force you to convert from Chapter 13 to Chapter 7 – this is often called a "forced conversion."
The reasons for conversions vary. For the most part, if you are instigating the conversion, you have a right to convert your case. But that doesn’t always mean you’ll qualify for Chapter 7 relief.
Learn when you might want to convert from Chapter 13 to 7, when the court might force you to do so, and whether you will face any eligibility issues.
Reasons to Convert from Chapter 13 to Chapter 7
You might want to convert from Chapter 13 to Chapter 7 because:
- your financial circumstances have changed and you can no longer make the Chapter 13 plan payments, or
- you filed for Chapter 13 bankruptcy primarily to keep certain property, and you decide you no longer want to keep that property (for example, your home or an expensive musical instrument).
When the Court Might Force You to Convert
The bankruptcy court can order you to convert your case to Chapter 7 only “for cause.” Examples of what constitutes cause for forced conversion include:
- failure to file a Chapter 13 plan on time
- failure to make Chapter 13 plan payments, or
- unreasonable delay that causes harm to your creditors.
Are You Allowed to Convert?
You have a right to convert your Chapter 13 bankruptcy case to a Chapter 7 bankruptcy case at any time, with one restriction. You cannot convert to Chapter 7 if you have received a Chapter 7 discharge within the previous eight years.
Will You Qualify for Chapter 7 Bankruptcy Relief?
However, even though you can convert your Chapter 13 bankruptcy to Chapter 7, in order to proceed with the Chapter 7 you must be eligible for Chapter 7 relief. There are a few eligibility requirements for filing for Chapter 7; the biggest one is that you must pass the means test.
What is the means test? The means test looks at your income and expenses and essentially determines whether you can pay some of your debts through a Chapter 13 plan. If you can, you
don’t qualify for Chapter 7. (To learn more about the means test, see our Chapter 7 Eligibility & the Means Test area.)
Does the means test apply to converted cases? Whether you must pass the means test when you convert your Chapter 13 case to a Chapter 7 case is an open question. Some courts have ruled that in converted cases, the debtor still must pass the means test in order to be eligible for Chapter 7 relief. See e.g. In re Chapman. 447 B.R. 250 (B.A.P. 8th Cir. 2011); In re Lassiter. 2011 WL 2039363 (Bankr. E.D. Va. 2011); In re Phillips. 417 B.R. 30 (Bankr. S.D. Ohio 2009). Other courts, however, have ruled that the means test doesn’t apply to Chapter 7 cases that have been converted from Chapter 13. See e.g. In re Guarin. 2009 WL 4500476 (Bankr. D. Mass. 2009); In re Willis. 408 B.R. 803 (Bankr. W.D. Missouri 2009); In re Dudley. 405 B.R. 790 (Bankr. W.D. Va. 2009).
Will you pass the means test? What if you originally filed for Chapter 13 because you couldn’t pass the means test? If your financial circumstances have changed, you may pass the means test now. Take it again. (For a handy online means test calculator, use Nolo’s Bankruptcy Means Test Calculator .)
Filing Procedures for Converted Cases
Here’s what happens with your paperwork and the process if you convert your case.
The petition and schedules. In most courts, the bankruptcy petition and forms that you filed for your Chapter 13 case become a part of your converted Chapter 7 case. However, you may have to amend some of the forms to list any debts you incurred after filing your Chapter 13 case (these can be discharged in your Chapter 7 case if they are otherwise dischargeable). And you’ll have to file another form, the Statement of Intention (this form tells the court what you plan to do with your secured debts.) A few courts require you to file a new set of schedules, even if nothing has changed.
Proofs of Claims. The creditors’ Proofs of Claims. if already filed, carry over to your Chapter 7 case.
The creditors’ meeting. You must attend another meeting of creditors, even if one was already held in your Chapter 13 case.
Exemptions. Some courts determine your exemptions as of the date you filed for Chapter 13 bankruptcy, while other courts determine them as of the date you convert to Chapter 7. (For more on exemptions, see our Bankruptcy Exemptions area.)