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Can you convert your Chapter 13 bankruptcy to a Chapter 7?

| Nov 6, 2020 | Chapter 13 Bankruptcy |

You ran into a period of unemployment or unusual financial demands. When the bills became impossible to manage, you decided to file for bankruptcy. Since you still had substantial income coming in, you decided that you merely wanted to reorganize your debts through Chapter 13.

It’s important to understand that Chapter 13 bankruptcies aren’t always successful. As such, you may be eligible to convert your case to a Chapter 7, instead. As long as you haven’t had a Chapter 7 discharge within the last eight years and you meet the income limitations in your state, there may be some good reasons to make that call.

Here’s why you may want to convert your Chapter 13 bankruptcy to Chapter 7:

  • Your financial situation has worsened. Perhaps you were simply optimistic about your finances when you filed, or maybe you’ve simply experienced new setbacks that weren’t anticipated. Whatever the cause, that can make Chapter 13 less viable.
  • You were trying to keep your home and realize that’s either unlikely or a bad plan. One of the benefits of Chapter 13 is that it can often circumvent foreclosure by allowing you to gradually repay those missing mortgage payments. It’s possible, however, that you may decide that you don’t want to hold onto the home because it’s a burden you don’t need. If your financial situation has worsened, you may simply no longer be able to afford the payments — even with extra time.
  • You simply want the process to end. Chapter 13 is time-consuming. For three to five years, you must make payments on your debts until the trustee agrees to discharge your case. In that time, you can’t really work on rebuilding your credit or savings. Plus, it may tie you to a specific area. If your life has changed since you filed your bankruptcy, you may find Chapter 7 more in line with your current needs or goals.

Your rights and responsibilities under a Chapter 13 bankruptcy are very different from those in a Chapter 7. It’s wisest to speak with an experienced attorney about your options.