Chapter 13 bankruptcy does have its benefits. People filing for Chapter 13 have the chance to keep some of their most cherished assets. However, life circumstances can change and Chapter 13 may not be the best option. Some filers may want to convert a Chapter 13 bankruptcy to a Chapter 7 bankruptcy because:
- Financial circumstances of filers change. They may be unable to afford their Chapter 13 payment plans due to these changes. Losing a job and not having access to other types of income is one example.
- Filers decide they do not want to keep property, such as a house or car. They may decide they cannot afford the payments, or there may be other reasons. Chapter 7 would allow the filer to discharge secured debts, such as a home or vehicle.
There are also cases where bankruptcy conversion is not voluntary. Filers may be forced by the bankruptcy court to convert their cases to a Chapter 7. This may happen if a filer misses payments under a Chapter 13 repayment plan.
There are eligibility requirements for this type of conversion. The court may reject conversions if the filer has received a discharge under Chapter 7 bankruptcy within the last eight years.
Can You Switch from Chapter 7 Bankruptcy to Chapter 13?
It is also possible to convert a Chapter 7 bankruptcy to a Chapter 13. Conversion from Chapter 7 to Chapter 13 can be forced or voluntary.
Forced conversions can happen if filers make mistakes on the means test. Filers may decide to convert their cases to Chapter 13 if they want to keep property, such as a home. They may also convert if their financial circumstances change after filing for Chapter 7 (such as finding a new job or receiving a raise).
Bankruptcy is a flexible process. Many people who file discover they have more options available than they initially realized.