Bankruptcy Conversions: Switching Chapters (7 to 13 and 13 to 7) Explained

Alexander Hernandez 4 min read

When filing for bankruptcy, debtors choose the chapter that best fits their financial situation and goals. However, circumstances change, and the Bankruptcy Code permits a debtor to convert their case from one chapter to another. This post breaks down what a conversion is and the primary reasons a debtor might switch between Chapter 7 (Liquidation) and Chapter 13 (Reorganization or wage earner’s plan).

What is a Conversion in Bankruptcy?

A conversion is the process of switching a bankruptcy case from one chapter of the Bankruptcy Code to another. It changes the legal framework governing the case, affecting how assets are treated, how debts are paid, and the debtor’s ongoing obligations.

Chapter 7 vs. Chapter 13

Feature	Chapter 7 (Liquidation)	Chapter 13 (Reorganization)
Primary Goal	Discharge unsecured debts quickly.	Repay debts over a 3-to-5-year plan.
Asset Treatment	Non-exempt assets are sold by the Trustee.	Debtor keeps all assets if they can afford it, paying their value through the plan.
Income Test	Requires the debtor to pass the Means Test.	Requires regular income (wage earner’s plan).

How to Choose Between Chapter 7 and Chapter 13

Means Test Update Reminder

Speaking of navigating bankruptcy eligibility, it’s vital to remember that the Means Test median income figures are regularly updated. These updates can significantly impact your ability to qualify for Chapter 7, which may prompt a consideration of conversion to Chapter 13 (or vice versa). For the latest dollar amounts and a full analysis of the changes, please refer to my recent post providing the updated income figures for every state.

Converting from Chapter 7 to Chapter 13

A Chapter 7 case can be converted to a Chapter 13 case at any time if the case has not yet been dismissed, provided the debtor is eligible to file under Chapter 13. This is a matter of right for the debtor, according to 11 U.S.C. § 706(a).

Primary Reasons for Conversion to Chapter 13

Protecting Non-Exempt Assets: This is the most common reason. If the Chapter 7 Bankruptcy Trustee identifies a valuable asset that cannot be protected by state or federal exemptions, the debtor can convert to Chapter 13 to keep the asset by paying its non-exempt value back to creditors through the payment plan.
Saving a Home from Foreclosure: Chapter 7 does not stop a foreclosure permanently. Chapter 13 allows the debtor to use the payment plan to catch up on mortgage arrearages (missed payments) over several years.
Non-Dischargeable Debts: Chapter 13’s “super-discharge” is sometimes broader than Chapter 7’s. For example, debtors may convert to address debts not dischargeable in Chapter 7, such as certain tax debts.

Converting from Chapter 13 to Chapter 7

A Chapter 13 debtor can also convert their case to a Chapter 7 case, typically under 11 U.S.C. § 1307(a). Similar to a 7-to-13 conversion, this is generally the debtor’s right.

Primary Reasons for Conversion to Chapter 7

Loss of Income or Inability to Pay: This is the most frequent reason. If the debtor loses their job, suffers a long-term illness, or has another financial hardship that prevents them from affording the monthly Chapter 13 plan payment, conversion to Chapter 7 is often the only way to seek relief instead of having the Chapter 13 case dismissed.
Financial Situation Changed: Another example to convert to Chapter 7 is that the debtor originally filed Chapter 13 to protect their car from repossession or their home from foreclosure. If the debtor has caught up on the arrears, the conversion to Chapter 7 is possible, assuming the car or home’s equity is protected or exempt.
Surrendering Assets: A debtor may choose to convert from Chapter 13 to Chapter 7 bankruptcy and surrender non-exempt assets, especially when a home has little equity. For instance, if the debtor is struggling to keep up with monthly Chapter 13 payments, they might decide it’s in their best interest to give up the home. By converting to Chapter 7, the debtor can surrender the property to the bankruptcy trustee for liquidation.

The Impact of a Chapter 13 to 7 Conversion

When a case converts from Chapter 13 to Chapter 7, the date of conversion typically becomes the new petition date for assessing the value of the debtor’s assets and determining which exemptions apply (though bankruptcy districts may vary on this point). This is critical because it requires careful legal analysis and being familiar with your district. This helps protect remaining assets.

Professor Hernandez is an attorney specializing in consumer finance and debt relief. He is the published author of Consumer Bankruptcy Law (Routledge Publishing) and teaches law and finance courses in both English and Spanish for an international university.

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. Paralegals and students who are buying single copies can do so via Amazon Books. To access my YouTube channel, click this link. You can also listen to my podcast on Spotify.

You can learn more about filing for bankruptcy and the bankruptcy petition via this lin k. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.

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Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only.

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