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Bankruptcy: What are the Qualifications for Converting Chapter 13 Bankruptcy to Chapter 7?

Posted: 11/02/2017 at 1:00 AM   /   by   /   comments (0)

Petition for bankruptcy

Debtors have the option to file a Chapter 13 bankruptcy, and for quite a few good reasons. Some of these include debt reduction and protection against wage garnishment. The good news is you can file for this type repeatedly and at any time. However, some unforeseen circumstances may arise and you may have to convert your Chapter 13 bankruptcy to Chapter 7.

Why Convert to Chapter 7 Bankruptcy?

Debtors might consider converting from Chapter 13 to Chapter 7 because their financial situation worsened and they cannot keep up with the current payment plans. Another reason is to give up certain real estate or properties that you wanted to keep initially, but decided to let go. Consulting with a bankruptcy lawyer in Salt Lake City enables you (or any other debtor) to determine a legal course of action after deciding to convert your status.

Parameters for Court to Force Chapter 7 Conversion

Whether you like it or not, there are cases when courts force debtors to convert to Chapter 7. And their only reason is “for cause.” Some examples that constitute as a cause for forcing a debtor to convert include:

  1. Failure to file a plan or make payments on schedule
  2. Unreasonable delays that result in harm to creditors

Is a Debtor Allowed to Convert?

Debtors can convert to Chapter 7 from Chapter 13 bankruptcy any time under one restriction — when they have received a Chapter 7 discharge in the last eight years.

Qualifying for Chapter 7 Bankruptcy Relief

To qualify for a conversion, debtors must pass a means test. This examines a debtor’s expenses and income and determines if they have the capacity to pay their debts on a Chapter 13 plan. If deemed that a debtor can still manage to stay on time with payments, they cannot convert to Chapter 7.

Converting to Chapter 7 bankruptcy from Chapter 13 may provide debtors with financial relief, especially if their situation changed since the time they filed the latter.