Converting From a Chapter 13 to a Chapter 7

With the advent of the income median level and the means test, debtors who previously might have been able to file a Chapter 7 bankruptcy have been forced to file Chapter 13. These debtors most often fulfill their bankruptcy case en route to a successful discharge. And yet there are those, along with those who needed to file Chapter 13 anyways, who encounter situations during their active Chapter 13 that require a conversion to a Chapter 7 bankruptcy.

What exactly is a conversion? Well, it is exactly what it sounds like - you convert your Chapter 13 case to a Chapter 7. 11 UCS 1307(a) provides the authority for a debtor to convert their case at any time. The problem is, of course, that the debtor must still meet the requirements for a Chapter 7 bankruptcy as if it were a new case.

For starters, this requires a means test analysis. Now, some courts have left the question open as to whether a converted case must pass the means test requirement, but most hold that it does. Furthermore, remember that when converting the case you must treat the Chapter 7 as if it is a new case. So, if there are any assets that need to be protected from liquidation, or preferential transfers, etc., those must be addressed with your attorney.

Your attorney will file amended bankruptcy petition schedules to update your case in conjunction with a notice to convert the case. You'll be assigned a new 341 meeting date that you need to attend, as well as a new interim trustee to administer your case. Your case number will stay the same, as essentially it is still the same case even if the structure has changed.

You will want to be careful, though, if your Chapter 13 paid mortgage arrears through the plan, or paid for a secured vehicle or any vehicle arrears through the plan. If the reason you filed a Chapter 13 was because of a lot of unprotected equity, there could also be issues that would potentially undermine a successful conversion to Chapter 7. Thus, while 1307(a) allows you to convert at any time, it is best to consult your attorney to ensure that you meet all the requirements that can lead you down the road to a successful discharge.