Chapter 13 bankruptcy allows a debtor to restructure his debts and repay them over a three to five year period. A Chapter 13 debtor must submit a plan, known as the Chapter 13 plan, to the court for confirmation (approval). Once the plan is approved, the debtor must make the plan payments and comply with all other provisions of the plan in order to receive a discharge.
What Happens If the Debtor Is Unable to Complete the Chapter 13 Plan?
When it becomes apparent that it will be impossible for a debtor to complete a Chapter 13 case, the debtor may file a Notice of Conversion. Additionally, the trustee or a creditor may file a Motion to Convert to Chapter 7 Case. A debtor may convert from Chapter 13 to Chapter 7 as a matter of right. Once a debtor defaults under the terms of his Chapter 13 plan, if the case is not converted to a Chapter 7, it will be dismissed. If the Chapter 13 case is dismissed, its as though the debtor never filed bankruptcy and his creditors may begin anew to make collection efforts against him.
How to Convert From A Chapter 13 to a Chapter 7 Case
To convert from a Chapter 13 case to a Chapter 7 case, a debtor must file a Notice of Conversion and pay the difference between the Chapter 13 filing fee and the Chapter 7 filing fee. The conversion is effective immediately upon the filing of the Notice of Conversion. In addition to the Notice of Conversion, a debtor must also file a Statement of Current Monthly Income and Means Test Calculation and a supplemental schedule of debts listing all debts arising after the commencement of the Chapter 13 case. Additionally, the debtor must file a Statement of Intention within 30 days of the order of conversion.
What About After-Acquired Property?
Any property acquired by the debtor after the commencement of the Chapter 13 case does not become the property of the Chapter 7 bankruptcy estate. Moreover, any post-petition increase in value of pre-petition property does not become property of the Chapter 7 estate. However, if the conversion is deemed to have been in bad faith, the court may order that property acquired by the debtor after the commencement of the Chapter 13 case become property of the Chapter 7 estate.
Getting Legal Help
Unless a case has already been converted, a Chapter 13 debtor has a right to convert to a Chapter 7. Conversion may seen relatively easy, but the bankruptcy laws are complex and how they are applied is constantly being updated and changed as bankruptcy cases across the country are heard and decided by federal judges. Therefore, it's best to talk to an experienced bankruptcy attorney to ensure that the conversion from Chapter 13 to Chapter 7 goes smoothly and that you receive a discharge and get the fresh start you deserve.
