Converting from Chapter 13 to Chapter 7 in the realm of bankruptcy law is a significant decision that individuals or businesses may consider when facing financial challenges. Chapter 13 bankruptcy involves a structured repayment plan, while Chapter 7 offers a fresh start through the liquidation of assets to discharge debts. Understanding the process and implications of this conversion is crucial for those seeking relief from overwhelming financial burdens.

Pros And Cons Of Converting Chapter 13 To Chapter 7

Converting from Chapter 13 to Chapter 7 in bankruptcy law can have both advantages and disadvantages, and the decision should be carefully considered based on one’s specific financial circumstances. Here are some pros and cons to consider:


  • Quick Debt Discharge: Chapter 7 typically results in a faster discharge of debts compared to Chapter 13, which may require several years of structured payments.
  • Fresh Start: Chapter 7 provides a clean slate, allowing individuals or businesses to start anew without the burden of most unsecured debts.
  • No Repayment Plan: In Chapter 7, there’s no need to maintain a lengthy repayment plan, which can be challenging for some debtors.
  • Exemption Protections: Certain assets may be protected by exemptions, ensuring that essential property, such as a primary residence or a vehicle, remains with the debtor in many cases.


  • Asset Liquidation: In Chapter 7, non-exempt assets may be sold to repay creditors, potentially resulting in the loss of valuable property.
  • Eligibility Criteria: Qualifying for Chapter 7 can be more challenging, as it often depends on income, and high earners may be required to file under Chapter 13.
  • Credit Impact: Chapter 7 can have a more severe and longer-lasting impact on one’s credit score, making it more challenging to obtain credit in the future.
  • Limited Debt Types: Not all debts are dischargeable in Chapter 7, such as certain tax debts, student loans, and child support.
  • Shorter Stay on Foreclosure: While Chapter 7 can temporarily halt foreclosure, it may not provide as much time to address mortgage arrears compared to Chapter 13.

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How To Convert Chapter 13 To Chapter 7

Converting from Chapter 13 to Chapter 7 in bankruptcy involves a legal process that should be handled with the assistance of an experienced bankruptcy attorney. Here are the general steps and considerations involved:

  • Consult with an Attorney: Before taking any action, it’s essential to consult with a bankruptcy attorney who can assess your financial situation and determine if converting to Chapter 7 is the best option.
  • Eligibility Check: Chapter 7 has eligibility requirements, including a means test to assess your income. Your attorney will help you determine if you qualify for Chapter 7.
  • File a Motion: If you are eligible for Chapter 7 and decide to convert, your attorney will file a formal motion with the bankruptcy court requesting the conversion. This motion should explain why the conversion is necessary, such as a change in your financial circumstances.
  • Credit Counseling: You may need to complete a credit counseling course as required by the Bankruptcy Code. Your attorney can guide you on how to fulfill this requirement.
  • Attend the 341 Meeting: Just like in Chapter 13, you will be required to attend a 341 Meeting of Creditors, where the bankruptcy trustee and your creditors can ask you questions about your financial situation.
  • Asset Evaluation: During the conversion process, the court will assess your assets to determine if there are any non-exempt assets that can be liquidated to repay creditors. It’s essential to work with your attorney to understand how this may impact your property.
  • Debt Discharge: If the conversion is approved, and your assets are liquidated as needed, you will receive a discharge of your qualifying debts, providing a fresh financial start.
  • Update Your Budget: With Chapter 7, there is no longer a structured repayment plan. Therefore, it’s crucial to create a budget and financial plan for life post-conversion to manage your finances responsibly.
  • Credit Rebuilding: After the Chapter 7 discharge, you’ll need to focus on rebuilding your credit, as it will have taken a hit due to the bankruptcy. Consider obtaining secured credit cards and making timely payments to begin the credit recovery process.

It’s important to note that the process may vary depending on your specific circumstances and local bankruptcy court procedures.

How To Qualify To Convert To Chapter 7

Qualifying to convert from Chapter 13 to Chapter 7 in bankruptcy depends on meeting specific eligibility criteria set forth by the Bankruptcy Code. Here are the general requirements you need to meet:

  • Pass the Means Test: The means test is a crucial eligibility requirement for Chapter 7 bankruptcy. It evaluates your income and expenses to determine if you have sufficient disposable income to pay your unsecured debts. If your current monthly income is below the median income for your state, you may automatically pass the means test. If your income is above the median, you’ll need to complete a more detailed means test, deducting allowable expenses, to determine your disposable income. If your disposable income is below a certain threshold, you may qualify for Chapter 7.
  • Changed Financial Circumstances: You must demonstrate to the court that there has been a substantial change in your financial situation since you filed for Chapter 13. This change should make it unreasonable or impossible to continue with the Chapter 13 repayment plan.
  • Not Disqualified: You must not be disqualified from Chapter 7 due to certain factors, such as a prior Chapter 7 discharge within the last eight years or a prior Chapter 13 discharge within the last six years.
  • Compliance with Court Orders: You must have been complying with the terms of your Chapter 13 plan and any court orders. This includes making payments as required and fulfilling other obligations under the Chapter 13 plan.
  • Credit Counseling: You may need to complete a credit counseling course as required by the Bankruptcy Code. This is typically a prerequisite for filing any type of bankruptcy.
  • No Fraudulent Behavior: You must not have engaged in any fraudulent behavior or abuse of the bankruptcy system. The court will assess your actions and financial transactions to ensure they are in compliance with the law.
  • Asset Evaluation: If you have non-exempt assets, the court may assess the value of these assets to determine if they can be liquidated to repay creditors. If the liquidation of these assets would not provide a significant benefit to creditors, it may be easier to qualify for Chapter 7.

Forced Conversion To Chapter 7

Forced conversion to Chapter 7 in bankruptcy occurs when a debtor’s financial circumstances or actions prompt the bankruptcy court or creditors to request a change in the bankruptcy chapter. This usually happens in a Chapter 13 bankruptcy case, where a debtor has initially chosen a structured repayment plan to address their debts. Common reasons for a forced conversion include the debtor failing to make required payments, violating court orders, or demonstrating an inability to adhere to the Chapter 13 plan. In such cases, the court may initiate the conversion to Chapter 7 to liquidate the debtor’s non-exempt assets and distribute the proceeds to creditors. Forced conversion serves as a protective mechanism to ensure that creditors receive some repayment when it becomes apparent that the original Chapter 13 plan is unworkable or being abused by the debtor.

Can I Convert From Chapter 13 To Chapter 7 Without Losing My House And Car?

Converting from Chapter 13 to Chapter 7 without losing your house and car is possible under certain circumstances. The key factors that determine whether you can retain these assets include the equity you have in your home and car, your ability to protect them using bankruptcy exemptions, and your current financial situation. If you have minimal equity and can fully exempt these assets based on your state’s exemption laws, you are more likely to keep your house and car in a Chapter 7 bankruptcy. However, it’s crucial to be up-to-date on mortgage and car loan payments, or be prepared to work out arrangements with the lenders to keep your secured assets. 

Why You Should Be Cautious Of Chapter 7 

While Chapter 7 bankruptcy can provide a fresh financial start for individuals and businesses, it is essential to approach it with caution and full awareness of its implications. Here are some reasons to be cautious when considering Chapter 7 bankruptcy:

  • Asset Liquidation: In Chapter 7, non-exempt assets may be sold to repay creditors. This could result in the loss of valuable property, including your home, car, or other assets. It’s critical to understand your state’s exemption laws and how they apply to your situation.
  • Credit Impact: Chapter 7 has a severe and long-lasting impact on your credit score. A bankruptcy filing can remain on your credit report for up to 10 years, making it more challenging to obtain credit and favorable interest rates in the future.
  • Limited Debt Discharge: Not all debts are dischargeable in Chapter 7, such as certain tax debts, student loans, child support, and some court judgments. You may still be responsible for these debts after bankruptcy.
  • Eligibility Criteria: To qualify for Chapter 7, you must pass the means test, which assesses your income and expenses. If you earn above the median income in your state, you may not be eligible for Chapter 7, potentially limiting your options.
  • Risk of Abuse Allegations: If it appears that you’re filing for Chapter 7 in an abusive manner or attempting to hide assets or income, the court or creditors can challenge your case, potentially leading to dismissal.
  • Loss of Privacy: Bankruptcy filings are public records, and your financial information becomes part of the public record. Some individuals may find this lack of privacy uncomfortable.
  • Rebuilding Credit: After a Chapter 7 discharge, rebuilding your credit will be a significant challenge. It can take time and responsible financial management to reestablish your creditworthiness.

Seeking A Bankruptcy Alternative?

CuraDebt, a bankruptcy alternative, is here to find the best debt-relief option available to you. CuraDebt has been helping individuals and small businesses for over 22 years nationwide. As of May 2023 CuraDebt received a score of 5 out of 5 on CustomerLobby for a total of 1179 customer views. CuraDebt is an Accredited Member of the American Fair Credit Council. Contact us for a free consultation. 1-877-850-3328.

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