Is it Possible to Convert a Chapter 7 Bankruptcy to Chapter 13?

 Posted on December 27, 2022 in Chapter 13 bankruptcy

Filing for bankruptcy can be a difficult decision. In some cases, a person may file for Chapter 7 bankruptcy, but they may later determine that a Chapter 13 bankruptcy would be more beneficial. In these cases, a person may be unsure about whether it is possible to convert from one type of bankruptcy to another. While these types of conversions are possible, there are certain criteria that must be met, and it is important to understand how bankruptcy laws may affect a case. 

What Is a Chapter 7 Bankruptcy?

A Chapter 7 bankruptcy is one of two types of bankruptcy filings available under the U.S. Bankruptcy Code. It is also known as “liquidation bankruptcy” because it may involve turning over some of a debtor's assets in exchange for debt relief. In most cases, debtors who file for this type of bankruptcy are able to discharge most or all of their unsecured debts within three to four months, and they will be able to exempt certain types of assets from liquidation. While Chapter 7 can provide a good way to eliminate unsecured debts, it may not be the best choice if a person has secured debts such as a mortgage and wants to keep their home.

What Is a Chapter 13 Bankruptcy? 

A Chapter 13 bankruptcy involves reorganizing a debtor's finances so that they can make payments on their outstanding debts over time while still being able to keep certain types of property (such as their home). A Chapter 13 repayment plan lasts three to five years, and it can allow a person to catch up on missed payments for secured debts or priority debts such as child support, while also paying off some of what is owed toward unsecured debts. A Chapter 13 bankruptcy may be preferable for debtors who are unable to pass the means test to qualify for Chapter 7, who wish to avoid the liquidation of certain assets, or who are looking to become current on missed mortgage payments and avoid foreclosure.

Is it Possible to Convert a Chapter 7 Bankruptcy to Chapter 13? 

Debtors are generally allowed to convert to a Chapter 13 case after filing a petition for a Chapter 7 bankruptcy. They may do so if they determine that they do not pass the means test, if they wish to avoid turning over certain non-exempt assets, or if they are looking to take advantage of other benefits offered by Chapter 13. In most cases, one conversion is allowed without the need to receive court approval. However, a debtor will need to prove that they have sufficient income and assets to support the repayment plan under a Chapter 13 filing. A conversion request may be denied if it is determined that a debtor acted in bad faith, such as by failing to report certain assets in the original Chapter 7 filing.

Contact Our New Braunfels Chapter 13 Bankruptcy Lawyer

Converting from one chapter of bankruptcy to another may not always be necessary, but it can be beneficial depending on your situation. Before making any decisions, it is important to consult with an experienced attorney who can help you understand all of your options and make sure that you are making the best choice for your financial future. At the Law Offices of Chance M. McGhee, we can explain the benefits of both types of bankruptcy and guide you in choosing the option that will provide you with the most benefits. Contact our Boerne bankruptcy attorney today at 210-342-3400 to set up a free consultation and learn more about your options for debt relief.

Sources:

https://www.law.cornell.edu/uscode/text/11/706

https://www.oyez.org/cases/2006/05-996