Can you convert from Chapter 13 to Chapter 7 bankruptcy?

Chapter 13 bankruptcy provides a way for individuals to deal with their financial troubles. Often, people who file for Chapter 13 do not pass the means test for Chapter 7 liquidation bankruptcy. However, it might be possible for a Louisiana debtor to convert Chapter 13 status to Chapter 7. If the person’s situation changes, revisiting the bankruptcy category might be possible.

Changing to Chapter 7 bankruptcy

Under Chapter 13, a repayment plan that lasts from three to five years is prepared by the debtor and submitted to the court for its approval. If it is approved and the terms complied with, most of the unsecured debt that remains after the end of the plan period is discharged. With a Chapter 7 bankruptcy, non-exempt assets face liquidation to pay some debts. Most of the remaining unsecured debt balances are discharged, and the process usually lasts only a few months. Not everyone qualifies for Chapter 7, and many of those who do not file under Chapter 13.

A person’s financial situation may change during bankruptcy, and completing the payment plan might prove challenging. Converting to Chapter 7 could be a possible option for such a debtor.

Exploring options to convert to Chapter 7

Converting from Chapter 13 to Chapter 7 bankruptcy centers on whether someone qualifies. When scheduled Chapter 13 payments rely on a steady income, an unexpected job loss could cause problems. The same might be the case when an illness leads to a drop in earnings combined with added medical expenses.

The bankruptcy court would doubtfully approve a conversion based merely on convenience. However, those suffering from additional financial hardships might qualify.

Other issues factor into the potential approval. Someone who underwent a Chapter 7 discharge sometime within the past 8 years would not qualify, for example. Those who do qualify might find converting to Chapter 7 helps their situation.