Yes, in most cases you can convert a Chapter 13 bankruptcy to Chapter 7 in California. Federal bankruptcy law gives Chapter 13 filers the right to convert to Chapter 7 at any time, as long as they qualify for Chapter 7 and are acting in good faith. Conversion can be a lifeline if a job loss, illness, or other change makes your repayment plan impossible to keep up with. At Law Offices of Terrence Fantauzzi, we help clients evaluate whether converting is the right move or whether another option would better protect their property.
Why Do People Convert From Chapter 13 to Chapter 7?
Chapter 13 plans last three to five years, and life can change a lot in that time. Common reasons for converting include:
- Losing a job or taking a significant pay cut
- Medical problems that reduce income or increase expenses
- Divorce or separation that changes household finances
- Deciding to surrender a home or vehicle the plan was designed to protect
- Falling behind on plan payments with no realistic way to catch up
When the plan no longer fits your budget, conversion may let you discharge qualifying debts quickly instead of risking dismissal of your case.
Do You Have to Qualify for Chapter 7 to Convert?
Yes. Converting does not bypass Chapter 7 requirements. You will generally need to pass the means test based on your current income, and you cannot have received a Chapter 7 discharge in a case filed within the last eight years. If your income has dropped since you first filed, you may now qualify even if you did not before. Learn more about Chapter 7 on our Chapter 7 bankruptcy page.
What Happens to Your Property When You Convert?
When a case is converted in good faith, the Chapter 7 case generally includes only the property you owned on the date you originally filed Chapter 13. Property you acquired afterward, such as new savings or a new vehicle, is usually not part of the Chapter 7 estate.
That said, a Chapter 7 trustee will be appointed and can sell nonexempt property to pay creditors. Assets you were protecting through your Chapter 13 plan, such as home equity above the California exemption limits, could be at risk. This is one of the biggest factors to review before converting.
What Happens to Plan Payments You Already Made?
Payments the Chapter 13 trustee already distributed to creditors stay with those creditors. Funds the trustee has collected but not yet paid out are generally returned to you after conversion, though some administrative costs may be deducted.
What Does the Process Look Like After Conversion?
After you file a notice of conversion, the case proceeds under Chapter 7. You can expect:
- A new Chapter 7 trustee assigned to your case
- A new meeting of creditors
- Updated schedules reflecting your current income and expenses
- A Chapter 7 discharge, often within a few months, if no issues arise
Are There Alternatives to Converting?
Converting is not always the best choice. Depending on your situation, you may be able to modify your Chapter 13 plan to lower your payments, or in limited cases request a hardship discharge. Our Chapter 13 bankruptcy page explains more about how plans work, and our bankruptcy FAQ answers other common questions.
Talk to an Attorney Before You Convert
Converting from Chapter 13 to Chapter 7 can offer faster relief, but it can also put certain property at risk. An attorney can compare your options and help you choose the path that protects you best. To discuss whether converting your case makes sense, call Law Offices of Terrence Fantauzzi at (909) 552-1238 to speak with a bankruptcy attorney today.
