One of the problems associated with a Chapter 13 petition for bankruptcy is that of time. A petitioner must commit to a repayment plan that is scheduled for at least three years, and three years can be a long time when it comes to the world of finance – just look at our economy over the last three or so years. What looks to many to be a safe and secure job today could turn to dust within a year, leaving a well-intentioned petitioner unable to continue making those repayments.
The court has long recognized that circumstances can and do change. For that reason, they have made the transition from one Chapter of bankruptcy to another fairly smooth. In fact, a debtor simply needs to file a Motion to Convert or a Notice of Conversion to the bankruptcy court and the conversion is done. Naturally, a debtor must be eligible for a Chapter 7 bankruptcy by way of meeting the means test. They will also need to include an updated list of creditors and income.
It is not unusual for a bankruptcy court trustee to initiate a conversion from a Chapter 13 to a Chapter 7. This is usually as a result of a review of the debtor’s circumstances. Some debtors try to work their way through the bankruptcy process while an honest appraisal of their circumstances reveals that any repayment plan could seriously disadvantage the petitioner and their family.
While it is extremely rare, it is possible to convert from a Chapter 7 to a Chapter 13. This halts the seizure of assets and moves the process on to a repayment plan. This is normally undertaken when a debtor suddenly finds employment and is in a position to meet those regular payments.
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