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Converting a case from Chapter 13 to Chapter 7

In some cases, it will make sense to consider converting a Chapter 13 case to a Case under Chapter 7. The first question that needs to be answered is whether you are eligible to proceed under Chapter 7 by converting your case. You must verify that it was over eight (8) years since the filing date of a prior Ch 7 ( where you received a Discharge) from the filing date of the Chapter 13 case. If it was less than eight (8) years, then you need to look at whether you can file a motion to dismiss the Chapter 13 and then file Chapter 7. Filing a new case will reset the bankruptcy "look-back" period which determines whether you can convert to or dismiss the Ch 13 and file under Chapter 7.

The advantage of converting to Chapter 7 from Chapter 13 is that you will only have to pay an additional $25.00 filing fee. Additionally, you are not required to re-qualify under the bankruptcy Means Test. Your income and expense schedules should show a change in circumstances where your income is now a little bit less ( at least) than your household expenses. The Bankruptcy Court needs to see evidence that you can no longer afford the Chapter 13 Plan payments.

Another consideration before you convert to Chapter 7 from Chapter 13 is whether you are paying off a vehicle loan inside your Chapter 13 Plan. Converting to Chapter 7 will cause the auto loan to, in most cases, go into default status because the loan was stretched out in the Chapter 13 Plan, most likely at a lowered interest rate. In many Chapter 13 Plans, the loan can be "crammed down," meaning only the fair market value of the vehicle is considered a higher priority secured debt (which must get paid, with interest).

Converting to Chapter 7 from Chapter 13 is not automatic. You should always discuss the options available with your attorneys before making any moves on your case.