The Short Answer
Yes, you can convert from a Chapter 13 to a Chapter 7 bankruptcy, but qualifying for that conversion isn't automatic — you have to pass the Means Test based on your current income. The most common reason people convert is a significant drop in income that makes the Chapter 13 plan payment unaffordable. We'll need to review your new income documents, your equity in any property, your tax situation, and the status of any secured debts like a mortgage or car loan before moving forward. If you qualify and conversion makes sense for your situation, the process typically takes several weeks.
A conversion is when a Debtor in an active bankruptcy case transitions to a different type of bankruptcy case. For example, someone was above the Means Test and, therefore, had to do a Chapter 13 bankruptcy. Things have changed and now they cannot afford their Chapter 13 plan payments. They may be able to convert to a Chapter 7 bankruptcy.
It’s important to understand that just because you may want to convert, it doesn’t mean you will qualify for the conversion. There are a number of specific things that will need to be looked at.
The change in income would need to be relayed to the attorney, along with 60 days of household income, such as 60 days of paystubs (or other income statements). The attorney could then check to see if the new income qualified the client for a Chapter 7 conversion. If so, the client may want to consider converting.
However, income is not the only factor that would need to be addressed before a client switches from Chapter 13 to Chapter 7 bankruptcy. The attorney would also need to consider factors such as whether the client is current on his or her mortgage and/or car payments, if the client owes a large amount in taxes, and/or if the client had any non-exempt equity in property that could not be protected at the time of filing. Your case would need to be checked for these items if you were interested in conversion before the process proceeded further.
Additionally, clients would need to check with his or her mortgage and car companies to ensure they would work with them should they convert to a Chapter 7 bankruptcy. All secured debts (such as mortgage, car, and furniture payments) would be paid as before by the Debtor. Additionally, any priority debts such as taxes and domestic support obligations would also be paid directly by the Debtor, as there is no Plan payment in a Chapter 7 bankruptcy.
Chapter 7 bankruptcy will wipe out unsecured debts such as credit cards, medical bills, and unsecured personal loans. As with a Chapter 13 bankruptcy, a Chapter 7 will not wipe out student loan debt.
There are also fees associated with a conversion that will need to be paid ahead of the conversion process. We would be able to quote you these fees after checking your case to see if you qualified for a conversion.
If you are interested in converting you need to provide our office with the following documents. The process to convert could take several weeks depending on the complexity of your situation. To expedite the process, go ahead pull together these documents so they are ready to be provided to our office.
- 60 days of income (pay stubs or profit and loss statements if self employed)
- Monthly living expenses (click link and fill out)
- Most recent tax return
- A list of any new creditors along with their address, the amount owed and the last four of their account number
Key Takeaways
- You must pass the Means Test with your current income to qualify for a Chapter 7 conversion — a drop in income is the most common trigger.
- Non-exempt equity in property, large tax debts, and mortgage or car arrears can all block or complicate a conversion even if your income qualifies.
- In a Chapter 7, there is no plan payment — you resume paying secured debts like your mortgage and car directly, and unsecured debts like credit cards and medical bills are discharged.
- Student loans are not discharged in Chapter 7, just as they aren't in Chapter 13.
- You will need to provide 60 days of income documents, a list of monthly expenses, your most recent tax return, and any new creditor information to start the conversion review.
- Conversion fees must be paid before the process begins, and the timeline depends on the complexity of your case.
Attorney Insight
The mistake I see most often is clients waiting too long to call us after their income drops — they fall behind on their Chapter 13 plan payments and the trustee files a motion to dismiss before we ever have a chance to look at conversion. Once a case is dismissed, you lose the protection of the automatic stay and creditors can resume collection immediately. In North Carolina, if your household income has genuinely fallen below the state median, conversion to Chapter 7 can be a clean exit — but we need current paystubs and a full picture of your assets before we can tell you whether it makes sense. The equity question is the one that catches people off guard: if you've built up non-exempt equity in your home or other property during your Chapter 13, a Chapter 7 trustee can liquidate it.
