Converting Chapter 13 Bankruptcy to Chapter 7

hapter 13 bankruptcy demands the debtor to make monthly payments to the creditors at the agreed amounts until the stipulated time frame. But, there may arise circumstances wherein the debtor becomes unable to meet the conditions stipulated by the agreement. This force the Court to dismiss the Chapter 13 bankruptcy or to convert Chapter 13 bankruptcy to Chapter 7. Under Chapter 7 the Trustee sells all the assets of the debtor and distributes the proceeds to the creditors.

Some of the circumstances under which the Chapter 13 bankruptcy gets converted into Chapter 7 are mentioned below:

Circumstances that lead to the conversion can be voluntarily requested by the debtor or involuntarily dictated by the court. The reasons for the latter can be when the debtor fails to make timely payment to the trustee and the consecutive failure results in the Court converting bankruptcy under Chapter 13 to Chapter 7. Similarly, where the debtor displays lack of good faith it leads to the waiver of his rights under Chapter 13. Any material default to the terms of the confirmed plan of redistribution of the finances also leads to the emergence of Chapter 7.

Sometimes the conversion is demanded by the debtor when he feels himself unable to meet the payment obligations defined under Chapter 13. Then, he can inform the trustee of his inability seeking their support in converting to Chapter 7 bankruptcy. The debtor may request the court to convert bankruptcy from Chapter 13 to Chapter 7. In such an event he has to describe in brief the causes for placing this demand along with the trustee’s agreement to the proposal, if any.

The law demands the debtor to undergo a credit counseling and education program before seeking conversion. Typically, the request for conversion will meet with the approval of the Court barring certain circumstances.