How long does it take to convert chapter 13 to chapter 7

How Long Does It Take To Convert Chapter 13 To Chapter 7?

In this article, we’ll discuss the important topic of: “How long does it take to convert chapter 13 to chapter 7?”

Let us start by describing the types of Bankruptcy that are available to file. Chapter 7 in Bankruptcy means that your non-exempt assets and properties are to be taken over by trustees to evaluate the worth, sell it, and try to pay back the debts to your creditors as per the Bankruptcy rules. 

Chapter 13 in Bankruptcy, on the other hand, means that you can save your assets and properties by paying an amount every month to the trustees, who then distribute the amount amongst creditors. 

Often debtors wish to convert Chapter 13 to Chapter 7 under certain circumstances. In this article, we discuss under what circumstances can a bankruptcy case be converted from Chapter 13 to Chapter 7 and how long does it take. 

How Long Does It Take To Convert Chapter 13 To Chapter 7?

Chapter 13 to chapter 7 conversion may seem simple to you. But that is not the case. Firstly, if you have received a chapter 7 discharge in the past eight years, you cannot apply. Next, to be eligible for this conversion, you will have to persuade the court that you are incompetent to pay the monthly charges. You will have to show the updated Schedules I and J to showcase your current expenses. 

When the conversion is approved, the court can now appoint trustees as per the Chapter 7 rules and schedule a 341 meeting of creditors. This meeting can happen after 30 days of conversion. 

There is a small convenience fee involved for the conversion. However, your file number remains the same, which means that it is the same case. All you have to do now is fill up a new set of forms and declare the new assets, debts incurred after the initial Bankruptcy was filed, etc. 

Reasons for Conversion

There can be two significant reasons why there can be a conversion. 

  • Convert when you feel Chapter 7 will benefit you

When your financial status changes and you feel that converting your Bankruptcy from chapter 13 to chapter 7, you can check the eligibility and apply for the conversion. 

If you start getting to feel that you will not make those monthly payments due to loss of income, the creditors can ask the bank for foreclosure. But since you will lose the property or asset, you might as well get it to consider bringing it converted to chapter 7. It will therefore settle all the discrepancies or shortages, which may have arisen later. 

In a chapter 13 conversion, it goes on for 36-60 months. In such long durations, there can often be a change in fortune. At times, people wish to get the conversion done to get rid of the long handling case of Bankruptcy. But it may not always stand true as you have to be eligible for this conversion under specific rules. 

  • Forced conversion by Bankruptcy Court

Court usually does not force a conversion. But such scenarios do occur when you are unable to repay the decided monthly amounts or are unable to follow the repayment plan. However, there are exceptions; for instance, if you fail to make one or two payments due to a valid reason, or despite the efforts, you cannot put together a confirmed payment plan, the court is likely to consider and dismiss your Chapter 13. 

But when the court and trustees feel that the debtor is misleading the court, suspects of abusing and manipulating the legal system, trying to hide the properties/assets to get a Chapter 7 discharge, or is trying to pay the creditors a lesser amount than that was decided. 

Pros and Cons of converting chapter 13 to chapter 7

Listing down a few advantages and disadvantages of the conversion- 

Pros:

  • In Chapter 7 bankruptcy, almost all the unsecured debts tend to get discharged.
  • You can get out of a recurring payment per month to creditors.
  • When you move to Chapter 7 bankruptcy, the case closes sooner (just in a few months).

Cons:

  • You will lose the non-exempt property forever as it will be sold by the trustee to pay the creditors.
  • Not all debts are discharged, e.g., Childcare, mortgage, medical expenses, etc. 
  • It may heavily affect your credit scores. 

Final Thoughts

In a nutshell, there is no fixed timeline for the conversion procedure to complete. There are multiple steps involved after you find you eligible for the conversion and would like to file for the same. After you have filed a case, and if the court finds you and your financial status are eligible for conversion, the process happens very soon. In this article, we hope you have your queries answered. 

Video

Here is a quick video to explain “How Long Does It Take To Convert Chapter 13 To Chapter 7” in further detail. 

Discolsure: I am not a financial expert and it is highly recommended that you seek out a professional before making any financial decisions. Articles are informational and for educational purposes only.

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