Yes, you can convert Chapter 13 bankruptcy to Chapter 7, but only under specific circumstances. The federal bankruptcy code allows this conversion, though it requires meeting certain eligibility rules and following strict procedures. Roughly 25% of Chapter 13 cases are dismissed or converted each year, with conversion to Chapter 7 being a significant pathway for debtors whose circumstances change dramatically.
What You’ll Learn
🔹 How Chapter 13 and Chapter 7 work differently and why someone might want to switch from one to the other
🔹 The exact legal reasons you can convert Chapter 13 to Chapter 7, including the hardship discharge option
🔹 Real-world scenarios showing when conversion makes sense and what happens to your debts when you convert
🔹 Common mistakes people make during conversion that delay the process or create legal problems
🔹 The step-by-step process for converting, including what paperwork you need and what your creditors can do about it
The Core Difference Between Chapter 13 and Chapter 7
Chapter 13 bankruptcy is a repayment plan where you keep your property and pay back some debts over three to five years. Chapter 7 is a liquidation where a trustee may sell non-exempt assets to pay creditors, but most remaining debts are wiped out. Many people choose Chapter 13 initially because they want to keep their house, car, or other property, or because they earn too much income to qualify for Chapter 7.
Over time, circumstances change. You might lose your job, face medical emergencies, or experience reduced income that makes your Chapter 13 plan unaffordable. When this happens, conversion becomes an option.
When You Can Convert Chapter 13 to Chapter 7
The 11 United States Code Section 1307(a) allows Chapter 13 debtors to convert to Chapter 7 “for any reason or no reason at all” as long as you haven’t already converted once in the previous 12 months. This is called voluntary conversion, and it’s the most straightforward path.
However, a more limited conversion exists through the hardship discharge option under 11 United States Code Section 1328(b). This allows conversion when unforeseen circumstances—like job loss, serious illness, or unexpected injury—make it impossible to complete your plan. Unlike voluntary conversion, hardship discharge has strict requirements.
For hardship discharge to work, three things must be true. First, the debtor must show that circumstances beyond their control make it impossible to pay the plan. Second, the debtor must have paid at least 50% of unsecured claims in the original plan. Third, the plan itself must not have been filed primarily to delay or defraud creditors.
Voluntary Conversion: The Easier Path
Voluntary conversion under Section 1307(a) is straightforward because it requires no specific reason. You simply file a motion to convert with the bankruptcy court, and unless the court finds you acted in bad faith, conversion happens. The one limitation is the 12-month rule—if you’ve converted from Chapter 7 to Chapter 13 in the past year, you cannot convert back.
When you voluntarily convert, the effective date of conversion matters. Your Chapter 13 plan stops immediately. Any remaining debts that weren’t paid through the plan get transferred to a Chapter 7 case, where they may be discharged. Property you’ve been protecting under Chapter 13 rules may now be at risk in Chapter 7 liquidation, depending on what exemptions you can claim.
One important detail: filing the conversion motion doesn’t automatically stop wage garnishments or collection efforts. You must follow the correct procedures to ensure the automatic stay continues to protect you.
Hardship Discharge: The Strict Path
Hardship discharge is different from voluntary conversion because it’s designed for people facing genuine emergencies. The court must approve the conversion, and the trustee and creditors can object. You need to prove that circumstances beyond your control make completion impossible.
What counts as a valid hardship? Job loss qualifies, but only if it was involuntary and you made reasonable efforts to find new employment. Serious illness or injury that prevents you from working also qualifies. Death of a spouse or family member supporting the household may qualify. However, poor business decisions, market downturns in your business, or voluntary job changes typically do not qualify as valid hardships.
The 50% payment requirement is strict. If your plan calls for paying $30,000 to unsecured creditors and you’ve only paid $14,000, you don’t meet the hardship discharge threshold. Additionally, the remaining debt that wouldn’t be paid under the plan cannot simply disappear—it gets moved to Chapter 7 for further discharge, but creditors can challenge whether you truly qualify.
Real-World Scenarios: When Conversion Happens
Scenario 1: Job Loss and Income Reduction
Maria enrolled in a five-year Chapter 13 plan in 2022, agreeing to pay $600 monthly through payroll deductions. She kept her car and home under the plan. In January 2024, she was laid off from her accounting job due to company restructuring. Within six months, she found part-time work earning 40% less than before, making the $600 payment impossible. She filed a motion to convert to Chapter 7 under Section 1307(a) because her circumstances changed dramatically.
| What Happened | What Resulted |
|---|---|
| Maria’s income dropped 40% | Her Chapter 13 plan became unaffordable |
| She filed voluntary conversion motion | Court granted conversion without objection |
| Her remaining debts moved to Chapter 7 | Qualifying debts were discharged; car and home remained protected under exemptions |
Maria’s car and home were protected under Chapter 7 exemptions because neither was worth more than exempt amounts, and she had paid significant equity through her Chapter 13 plan.
Scenario 2: Medical Emergency and Hardship Discharge
David completed a three-year Chapter 13 plan but was still in the plan when he suffered a serious heart attack in year four. He paid $36,000 of the $50,000 owed to unsecured creditors (72% of the plan), exceeding the 50% requirement. He could no longer work due to his condition and had no reasonable prospect of recovery. He filed for hardship discharge under Section 1328(b).
| Hardship Factor | Impact |
|---|---|
| Serious illness preventing work | Qualified as valid hardship circumstance |
| Payment of 72% of unsecured claims | Met the 50% threshold for hardship discharge |
| Remaining $14,000 of unsecured debt | Converted to Chapter 7 and discharged |
David received a discharge of both the hardship discharge portion and the remaining debt, leaving him debt-free except for his car loan and mortgage, which had been part of his original plan.
Scenario 3: Plan Modification Failed and Hardship Resulted
Jennifer entered Chapter 13 paying $800 monthly over five years. Two years into the plan, her ex-spouse stopped paying child support, increasing her financial burden significantly. She tried to modify her plan to accommodate the change, but creditors objected to the modification because she had no income increase to support it. Unable to afford both her Chapter 13 plan and basic living expenses, she filed to convert to Chapter 7 under Section 1307(a).
| Status | What Happened |
|---|---|
| Original plan terms | $800 monthly payment for five years |
| Unexpected hardship | Loss of $400 monthly child support income |
| Modification attempt | Creditors objected; plan remained unchanged |
| Voluntary conversion | Court approved conversion to Chapter 7 |
The conversion eliminated her remaining unsecured debts, allowing her to rebuild with only secured debts (car and mortgage) remaining.
The Legal Process: Step by Step
Converting from Chapter 13 to Chapter 7 requires filing the correct paperwork with the bankruptcy court. Most voluntary conversions are simple, but hardship discharges require additional steps and justification.
First, you must file a motion to convert with the court. This is typically a one-page form stating your request and the legal basis. For voluntary conversion under Section 1307(a), you simply state that you’re converting for personal reasons. For hardship discharge, you must provide detailed facts explaining the unforeseen circumstance, when it occurred, what you’ve done to try to resolve it, and why you can’t complete the plan.
Second, the court sends notice to the trustee and all creditors. They have 14 days to file an objection. For voluntary conversion, objections are rare unless the trustee finds fraud or abuse. For hardship discharge, creditors often object because they prefer the Chapter 13 plan, which typically pays more than Chapter 7.
Third, if no one objects to voluntary conversion, the court automatically grants it without a hearing. If objections are filed or it’s a hardship case, the court schedules a hearing. You may need to testify about your financial situation and the circumstances forcing conversion.
Fourth, once conversion is approved, your Chapter 13 case formally closes and a new Chapter 7 case opens with a different trustee. Your property is re-evaluated under Chapter 7 exemptions. Any property you kept through Chapter 13 that exceeds exemption limits could now be liquidated, though in practice, many Chapter 13 debtors find their property still protected under Chapter 7 exemptions because they’ve built equity through plan payments.
Fifth, the Chapter 7 trustee may examine your assets and income. If you have valuable non-exempt property, the trustee sells it. Otherwise, the trustee administers remaining unsecured debts, which typically get discharged within three to four months of conversion.
What Happens to Your Debts When You Convert
When you convert from Chapter 13 to Chapter 7, different types of debts are treated differently. Secured debts—mortgages, car loans, and loans secured by collateral—generally remain the same. You keep making payments on these debts or surrender the property.
Unsecured debts are divided into two categories: those paid through your Chapter 13 plan and those not fully paid. Debts paid through the plan are satisfied as of the conversion date. Remaining unpaid unsecured debts transfer to Chapter 7, where they’re typically discharged.
Priority unsecured debts are treated specially. These include recent taxes, child support, alimony, and certain wage claims. Priority debts cannot be discharged in Chapter 7, so they must be paid. If your Chapter 13 plan was set to pay priority debts over five years, those payment obligations continue in Chapter 7 form.
Student loans present a unique situation. They’re rarely discharged in either Chapter 7 or Chapter 13 unless you can prove undue hardship under the Brunner test or the newer Totality of the Circumstances test established by recent Supreme Court decisions. Conversion to Chapter 7 doesn’t automatically eliminate student loans.
What Creditors Can Do: Objections and Proceedings
When you file to convert, creditors and the trustee receive notice and can object. The grounds for objection differ between voluntary conversion and hardship discharge.
For voluntary conversion, creditors can only object if they believe you acted in bad faith. Bad faith means you’re converting specifically to defraud creditors, hide assets, or abuse the bankruptcy system. Simply wanting to discharge debts faster is not bad faith. Creditors rarely succeed with bad faith objections on voluntary conversions because courts interpret the “any reason or no reason” language broadly.
For hardship discharge, creditors can object on the grounds that your hardship wasn’t genuine, you didn’t meet the 50% payment threshold, or your conversion was in bad faith. The trustee might object if liquidation through Chapter 7 would pay less than continued Chapter 13 payments. The court balances these concerns against your genuine need for relief.
If creditors object to hardship discharge, the burden of proof falls on you to prove unforeseen circumstances and the 50% payment threshold. Courts examine your job search efforts, medical records, and financial documents carefully.
One important point: during the conversion process, the automatic stay continues to protect you. Creditors cannot pursue collection efforts, wage garnishment, or foreclosure while your conversion is pending court approval.
State-Specific Rules and Variations
While conversion law is primarily federal, some states have specific exemption rules that affect conversion outcomes. States like California, Texas, and Florida allow generous homestead exemptions, meaning your home stays protected in Chapter 7 even after conversion. Other states like New York have more limited exemptions, so property you kept in Chapter 13 might be vulnerable in Chapter 7.
Bankruptcy courts within each district also develop different practices. Some courts routinely approve voluntary conversions without hearings, while others require more documentation. The U.S. Trustee Program oversees bankruptcy administration in each region and may have guidelines about conversion practices.
Some states have passed laws affecting how Chapter 13 plans work, which indirectly affects conversion. For example, states with strict foreclosure timelines or anti-deficiency laws may make Chapter 13 plans easier or harder to complete, influencing conversion decisions.
Income Limits and Means Test Issues
One reason people choose Chapter 13 is that they earn too much money to qualify for Chapter 7. When you convert, does the means test apply again?
The answer is no in most situations. 11 United States Code Section 1307(c) exempts converted cases from the means test for dismissal. However, the trustee and creditors can still object to your conversion on bad faith grounds if they believe you’re abusing the system.
If you earned above the state median income when you filed Chapter 13, the court may scrutinize your conversion more carefully. However, significant income reduction since you filed Chapter 13 can justify conversion. If you earned $150,000 when you filed and now earn $60,000, that’s a legitimate reason for conversion.
The bankruptcy means test calculator used by courts compares your current income to state median income. Even though it doesn’t technically apply to conversion, judges consider it as background information.
Common Mistakes to Avoid
Mistake 1: Converting Without Understanding Exemptions
Many debtors assume property protected in Chapter 13 will stay protected in Chapter 7. This isn’t always true. Chapter 13 protects everything because you’re on a repayment plan, while Chapter 7 exemptions are limited. If you own a vacation home or jewelry worth thousands, those assets might not be exempt in Chapter 7. Before converting, calculate what you could lose under Chapter 7 exemptions for your state.
Mistake 2: Missing the 12-Month Conversion Rule
If you converted from Chapter 7 to Chapter 13 within the past 12 months, you cannot convert back to Chapter 7. Some debtors forget they filed Chapter 7 first, attempt to convert prematurely, and have their conversion motions denied. Check your bankruptcy history before filing.
Mistake 3: Filing Conversion Without Professional Help
While voluntary conversion forms are simple, mistakes happen. Filing the motion to the wrong court, using the wrong case number, or missing filing deadlines can delay conversion or result in denial. An attorney typically catches these errors before filing.
Mistake 4: Failing to Update Financial Information
When you file for hardship discharge, the court reviews your current financial situation. If your paperwork shows income and expenses from months ago, creditors will challenge your hardship claim. Update all documents before filing, including recent pay stubs, tax returns, and proof of job search efforts.
Mistake 5: Not Stopping Wage Garnishments Immediately
Conversion doesn’t automatically stop creditor actions. You must file the conversion motion and obtain court approval for the automatic stay to remain in effect. During the gap between filing and approval, creditors may continue garnishing wages. Contact your employer’s payroll department and the garnishing creditor immediately after filing to confirm the stay is active.
Mistake 6: Attempting Conversion Too Early
For hardship discharge, you must show you’ve paid at least 50% of unsecured claims. Some debtors file for hardship discharge after 12 months of a five-year plan, not realizing they’ve only paid 20% of the claim amount. Calculate your payment percentage before filing to ensure you meet the threshold.
Mistake 7: Misrepresenting the Hardship
Courts investigate hardship claims carefully. If you claim you lost your job but actually left it voluntarily, the court will deny hardship discharge. Be honest about how circumstances changed. If you made a poor business decision that caused hardship, that’s not a valid unforeseen circumstance.
Do’s and Don’ts in the Conversion Process
| Do This | Why It Matters |
|---|---|
| Consult a bankruptcy attorney | Attorneys prevent filing errors and optimize outcomes |
| Gather current financial documents | Courts require recent information to evaluate hardship |
| Check your state’s exemptions | Knowing what you can keep protects your property |
| File complete paperwork | Missing information delays or denies conversion |
| Document the hardship thoroughly | Courts examine evidence of job loss, illness, or injury |
| Don’t Do This | Why It Matters |
|---|---|
| Assume all property stays protected | Chapter 7 exemptions are more limited than Chapter 13 |
| Convert to hide assets | Courts investigate for fraud; penalties include dismissal |
| Miss deadlines or court dates | Missing deadlines results in case dismissal |
| Ignore creditor objections | You must respond to objections or conversion is denied |
| Claim false hardship | Perjury and bankruptcy fraud carry criminal penalties |
Pros and Cons of Converting to Chapter 7
| Pros | Cons |
|---|---|
| Remaining debts are discharged faster (3-4 months vs 3-5 years) | Non-exempt assets may be liquidated and sold |
| No need to make ongoing monthly payments | Some property you kept in Chapter 13 could be lost |
| Job change or income issues no longer affect your case | Your credit report shows two bankruptcy filings instead of one |
| Legitimate hardship claims reduce creditor repayment expectations | Creditors may file objections, delaying or preventing conversion |
| Simpler case administration with fewer court requirements | You lose income protection from Chapter 13 plan |
How Creditors React: The Trustee’s Role
The Chapter 13 trustee has significant power in the conversion process. The trustee receives notice of your conversion motion and must report to the court on whether conversion is appropriate. The trustee calculates how much you’ve paid on your plan and what remains.
Trustees often don’t object to voluntary conversions because they prefer to close their case. However, trustees always object to hardship discharges when the Chapter 7 trustee would pay significantly less. If your plan was paying creditors $400 monthly but Chapter 7 would pay them almost nothing, the trustee argues you should continue the plan.
When Chapter 7 begins, a new trustee takes over. This trustee may liquidate assets, hire auctioneers, or sell property through court-ordered sales. However, most Chapter 7 cases are “no-asset” cases where nothing is liquidated because exemptions protect everything.
When Conversion Fails or Gets Denied
Courts occasionally deny conversion motions. Voluntary conversion gets denied primarily on bad faith grounds, which requires strong evidence. For example, if you have valuable non-exempt assets you’re trying to hide, or if you’re converting to delay a lawsuit, the court may find bad faith and deny conversion.
Hardship discharge gets denied most often because the debtor doesn’t meet the 50% payment threshold or creditors prove the hardship wasn’t genuine. If your hardship claim is weak—for example, you claim job loss but were actually fired for misconduct—the court will deny it.
If conversion is denied, you remain in Chapter 13. Some debtors can modify their plan instead, reducing monthly payments to match new income. This keeps you in Chapter 13 longer but may be less costly than conversion and plan failure.
The Modified Income Rule and Recent Changes
Recent years have seen changes in how courts treat conversion and income. The BAPCPA (Bankruptcy Abuse Prevention and Consumer Protection Act of 2005) tightened conversion rules significantly. However, courts have generally interpreted the “any reason or no reason” language of Section 1307(a) to mean that creditors cannot force dismissal of conversion cases based on insufficient income.
The distinction between voluntary conversion and hardship discharge has become clearer in recent case law. Courts now recognize that Section 1307(a) voluntary conversion cannot be denied simply because you earn too much money or because creditors would receive less in Chapter 7. Bad faith must be proven with actual evidence.
How Your Credit Report is Affected
Conversion affects your credit report differently than a straight Chapter 7 or Chapter 13 filing. Your Chapter 13 case and Chapter 7 case both appear as separate bankruptcy filings on your credit report. This shows lenders that you filed for protection twice, potentially signaling deeper financial problems.
However, the sooner you complete bankruptcy, the sooner you begin rebuilding credit. Converting from Chapter 13 to Chapter 7 and finishing Chapter 7 in months may leave you better positioned to rebuild credit than staying in Chapter 13 for years longer.
Bankruptcy remains on your credit report for seven to ten years depending on the type. Chapter 7 typically falls off after ten years. Chapter 13 is removed after seven years. When you convert, the Chapter 13 filing date essentially restarts for timeline purposes, potentially extending the bankruptcy reporting period.
Secured vs. Unsecured Debts After Conversion
Understanding the difference in how these debts are treated is essential. Secured debts are tied to property—your mortgage is secured by your home, and your car loan is secured by your vehicle. When you convert to Chapter 7, secured debts don’t automatically disappear. You must decide whether to keep the property by continuing payments or surrender it.
Unsecured debts—credit cards, personal loans, medical bills, and payday loans—have no collateral backing them. These debts are typically discharged in Chapter 7 unless they’re non-dischargeable types like student loans or recent taxes. Your Chapter 13 plan may have scheduled paying these debts partially, but conversion can finish them off in Chapter 7.
The amount of unsecured debt you’ve already paid matters significantly. If your five-year plan required paying $60,000 in unsecured debt but you’ve only paid two years’ worth, conversion to Chapter 7 discharges the remaining $36,000 instead of requiring continued payment.
The Reaffirmation Question: Keeping Property in Chapter 7
When you convert to Chapter 7, the court may require you to reaffirm any debts on property you want to keep. Reaffirmation means you agree to remain personally liable for the debt even though bankruptcy would normally discharge it.
For example, if your car has a Chapter 13 plan payment arrangement and you want to keep the car, you might need to sign a reaffirmation agreement for the car loan. Without reaffirmation, the lender could repossess after discharge. With reaffirmation, you keep the car but remain responsible for the loan.
Reaffirmation is optional but often necessary to keep property. The bankruptcy court must approve reaffirmations to ensure they’re not an abuse. You can declare in writing that you don’t reaffirm, allowing the property to be returned if you can’t pay.
Frequently Asked Questions
Can I convert if I’ve already converted once before?
No. 11 United States Code Section 1307(e) prohibits conversion if you’ve converted from one chapter to another in the previous 12 months. You must wait a full year before converting again.
What happens to my Chapter 13 trustee’s fees after conversion?
No. Chapter 13 trustee compensation stops when conversion is approved. The Chapter 7 trustee takes over and charges a commission of up to 25% on distributed funds, though most Chapter 7 cases are no-asset cases with minimal fees.
Will converting to Chapter 7 affect my Chapter 13 plan payments already made?
No. Payments you made during Chapter 13 count toward satisfying debts. You don’t lose credit for payments already made; creditors apply them to the debt balance as of the conversion date.
Can creditors force me to stay in Chapter 13 instead of converting?
No. Under Section 1307(a), creditors cannot force dismissal of voluntary conversion. Only courts can deny conversion, and only for bad faith or fraud—proven with evidence.
Does hardship discharge mean all my debt disappears?
No. Hardship discharge discharges eligible unsecured debts you haven’t paid through your plan. Priority debts like taxes and child support remain, and secured debts continue.
How long does conversion take from filing to approval?
Usually 2-8 weeks. Voluntary conversions without objections can be approved in days. Hardship conversions with objections may take months due to hearing schedules.
What state exemptions apply when I convert?
Your current state of residence’s exemptions apply. If you moved after filing Chapter 13, your new state’s exemptions determine what property you protect in Chapter 7.
Will my employer be notified about conversion?
Only if wage garnishment is active. The court sends notice to garnishing creditors, who then notify your employer to stop garnishment. Your employer doesn’t receive direct court notice otherwise.
Can I convert if I’m behind on my Chapter 13 payments?
Yes. Being behind on Chapter 13 payments doesn’t prevent voluntary conversion. However, courts scrutinize whether you’re converting to escape a plan you can’t afford versus acting in bad faith.
Do my dependent children affect conversion eligibility?
No. The number of dependents doesn’t prevent conversion. However, child support obligations are treated as priority debts and cannot be discharged.
What happens if I lie about my income when filing for conversion?
Criminal penalties apply. Bankruptcy fraud, including misrepresenting income, carries up to five years in prison and $250,000 in fines under 18 United States Code Section 1519.
Can I convert during a Chapter 13 plan modification?
Yes. You can file for conversion even while a plan modification is pending. The conversion typically supersedes the modification process.
Are attorney fees different for conversion?
Usually less than initial filing. Conversion motions cost $500-$1,500 in attorney fees versus $2,000-$3,500 for original Chapter 13 filing. Court filing fees remain the same.
Does conversion affect my student loans?
No. Student loans cannot be discharged in Chapter 7 unless you prove undue hardship. Conversion doesn’t change student loan treatment.
Can the court order me to stay in Chapter 13 instead of converting?
No. Courts cannot force you to remain in Chapter 13 if you file valid voluntary conversion. Only dismissal is available, and that requires proving bad faith.
What if my Chapter 13 plan was approved for a short period, like 24 months?
Conversion still works. Regardless of your plan length, voluntary conversion is available anytime. Hardship discharge requires the 50% payment threshold, regardless of plan duration.
Related reading
- What Are the Qualifications for Chapter 13 Bankruptcy? (w/Examples) + FAQs
- What Do You Lose in Chapter 13 Bankruptcy? (w/Examples) + FAQs
- Are Chapter 13 Payments Affordable? (w/Examples) + FAQs
- Can Chapter 13 Be Discharged Early? (w/Examples) + FAQs
- What Happens After Chapter 13 Bankruptcy?(w/Examples) + FAQs
- What Happens When You File Chapter 13 Bankruptcy? (w/Examples) + FAQs
- What Bankruptcy Chapter Should I File? (w/Examples) + FAQs