What is “Conversion” from Chapter 7 to Chapter 13?

“Conversion” is switching from one bankruptcy chapter to another before the bankruptcy case is completed. Focusing here on “converting” from Chapter 7 to 13, why would you want to make this switch between these very different options?

You would do so essentially, either voluntarily and involuntarily. Either because 1) changed circumstances make Chapter 13 the better option for you, or 2) you are required to convert to Chapter 13 even if you would have preferred to finish the Chapter 7 case.

Converting Voluntarily

The opportunity to change a Chapter 7 case to a Chapter 13 one is not often used, partly because the window of time to do so—while that Chapter 7 case is active—is so short. It can be a valuable tool for dealing with unexpected changes in circumstances within that short window. For example, you might sensibly decide to file a Chapter 7 case because you are just too far behind on your home mortgage payments and your income is too low to justify trying to hold onto the home with a Chapter 13 case. But if just a month or two after filing the Chapter 7 case you unexpectedly get a much better paying job, making a Chapter 13 payment plan feasible after all, you could convert from your Chapter 7 case into a Chapter 13 one.

Converting Involuntarily

You can be induced to convert from Chapter 7 to Chapter 13 for a variety of reasons, although at least theoretically you can’t be forced to do so. Section 706 (c) says that the bankruptcy “court may not convert a case under this chapter [7] to a case under chapter . . . 13 . . . unless the debtor requests or consents to such conversion.” But either under Sections 706 or 707 the court can dismiss, or throw out, your Chapter 7 case under certain circumstances, and in those situations it is usually better to convert to Chapter 13 as a fallback option instead of being without any protection from your creditors.

Both these voluntary and involuntary conversion situations are relatively rare—the vast majority of Chapter 7 cases finish successfully without conversion.

However, one scenario where debtors are induced to convert is when a debtor (most often one not represented by an attorney) has too much income and/or not enough allowed expenses so that the debtor fails the “means test,” which results in what is labeled a “presumption of abuse” under Section 707(b)(2) . If the debtor does not succeed in “rebutting this presumption with special circumstances,” the court can dismiss, or throw out, the Chapter 7 case. Or the debtor can avoid being left at the mercy of unprotected from creditors by preempting the dismissal by with the filing of a motion to convert to Chapter 13, which the court almost always grants.

Conversion to Chapter 13 can be a wise tactical move. Cases often don’t involve such technical maneuvering, but it helps to know you have an experienced attorney at your side if and when it becomes necessary. At the office of bankruptcy attorney Carrie Weir, in Rockwall, Texas, I provide a free initial consultation to anyone with questions or concerns regarding a bankruptcy filing. Please reach me at my office by using the contact form here or by calling me at 972-772-3083 to arrange a private meeting. I represent clients in Rockwall, Heath, Greenville, Lavon, Wylie, Mesquite and Rowlett, Texas. I’m at your side whether your case is straightforward or complex.

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