Kentucky Bankruptcy Law

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The Why and How of Converting a Chapter 13 to a Chapter 7 Bankruptcy

I have written previously about the flexibility that a Chapter 13 bankruptcy affords the debtors. One reason for this flexibility is that 11 U.S.C. Sect. 1307(a) provides a debtor with the right to convert their Chapter 13 to a Chapter 7 at any time so long as they do so in good faith (11 U.S.C. Sect. 348(b)) and they qualify to be a Chapter 7 debtor (see 11 U.S.C. Sect. 1307(g)). In other words, you cannot file a Chapter 13 because you do not qualify for a Chapter 7 due to the means test and then turn around and convert into a Chapter 7. However, if you start into a Chapter 13 and you just cannot keep up, converting may be just the thing to do.

The top reasons to convert from a Chapter 13 to a Chapter 7 include being unable to keep up with plan payments or being unable to make the regular house payments outside of the plan. This can come about because of a change in circumstances like a job loss, divorce, increase in family size without additional income, or just because the plan was too ambitious to start with. But, the ability to convert does not depend on the reason why.

Although the date of filing remains fixed at the original filing date, the debtor can include new debts incurred after filing the Chapter 13 but prior to the conversion in the Chapter 7 pursuant to 11 U.S.C. Sect. 348(d) which is an added bonus to conversion. The schedules of property, debt, exemptions and executor contracts filed in the Chapter 13 carry over into the Chapter 7, but a new meeting of creditors will be held and the time for the trustee filing objections and for creditors to file claims starts afresh.

Different courts and jurisdictions have slight variances in what is required to convert. In the Eastern District of Kentucky, the debtor just files a Notice of Voluntary Conversion, a schedule of unpaid debts (new post-petition debts), and an updated disclosure of attorney fees related to the conversion. Notice is mailed out through the courts system just as in a brand new bankruptcy case. While it is not initially required, it may be a time saver to go ahead and file a new means test showing the results at the time of the conversion since some trustees request this. The court clerks add the unpaid creditors to the mailing matrix and notices are mailed out by the court. There is a conversion fee of $25.00 paid to the court. And, voila, you are now in Chapter 7.

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May 11, 2011 - Posted by | Chapter 13, Chapter 7, Conversion | , , , , , ,

13 Comments »

  1. You have provided a great deal of info, and it is right to the point.
    Thanks…

    Comment by Julio MUnoz | July 9, 2011 | Reply

  2. My brother suggested I may like this website. He was once entirely right. This post truly made my day. You can not consider simply how much time I had spent for this info! Thanks!

    Comment by austin bankruptcy | May 11, 2012 | Reply

  3. So If I am reading the article correctly, if we do not qualify for a Chapter 7 initially due to income to high and we go into the 13 with good faith and for whatever reason we can not keep up with the payments, We can convert to the 7 from a 13 with our incomes still being what they were before hand. No means test (income qualifiers) on a conversion?

    Comment by Ron Eagan | January 30, 2013 | Reply

    • The answer is “it depends”. If the Debtor did not initially qualify for a Chapter 7 under the means test, but now they do, then the trustee’s office in this district has allowed for conversion without objection. However, I do not go so far as to say this is a guarantee. I believe it is going to be a fact specific analysis.

      Comment by G.A. Napier | January 30, 2013 | Reply

  4. Please clarify your response “If the Debtor did not initially qualify for a Chapter 7 under the means test, but now they do” not sure what this means? An example would help.

    We have to high of an income to qualifying for a Chapter 7 and if we file a chapter 13 for 60 months and the payments plan is to ambitious can the 13 be converted to a 7 if the income is the same as before, no change in circumstances other than the 13 was not workable? I really appreciate your responses

    Comment by RJ | February 1, 2013 | Reply

    • With no change in circumstances, then no, I would advise against trying to convert to a Chapter 7 because it would likely be objected to and fail. However, if you truly are not able to keep up with Chapter 13 payments, then something was not figured accurately and the plan should be modified. From there, it gets more complicated and I cannot speak to your specific situation. Sometimes plan payments are too high because there were expenses not figured accurately or sometimes it is because a debtor was too ambitious in trying to keep property (usually a car) that has a secured debt. So, it may mean surrendering property to make the Chapter 13 work. Finally, Chapter 13’s are voluntary and you can always dismiss it if it appears you would do better outside the Chapter 13. There are other fact specific options that come to mind, but they are too involved to go into here.

      Comment by G.A. Napier | February 1, 2013 | Reply

  5. Appreciate your time. Last response, what are some valid examples defining a change in circumstances for conversion?
    If we end up dismissing it am I prevented from filing again GeForce what length of time if need be?

    Comment by RJ | February 1, 2013 | Reply

  6. Hi would you mind stating which blog platform you’re using?
    I’m going to start my oown blog soon but I’m having
    a tough time choosing between BlogEngine/Wordpress/B2evolution and Drupal.
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    Comment by Jenifer | September 27, 2013 | Reply

  7. do these laws apply to Kansas I am in a chapter 13 wanting to convert to a chapter7

    Comment by annabelle howard | October 7, 2013 | Reply

  8. The over-arching laws are Federal laws, but each district has slightly different procedures, so you may have to file a motion to convert instead of just giving notice. You should look at local procedures.

    Comment by G.A. Napier | October 7, 2013 | Reply

  9. Thanks for finally writing about >The Why and How of Converting
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    Comment by UK business advice | September 12, 2014 | Reply

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    Comment by Johnson | June 19, 2015 | Reply

  11. Thought-provoking post – I was fascinated by the information , Does someone know if I might get ahold of a template PH DFA JVBL-APCE-LVJZ-PPT-DO copy to edit ?

    Comment by Kimiko Macko | November 29, 2015 | Reply


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