Can You Convert Chapter 13 to Chapter 7?

Yes, in many cases you can voluntarily convert a Chapter 13 bankruptcy to a Chapter 7, but it is not an automatic right. You generally qualify if your income has dropped and you now pass the Chapter 7 means test, or if your current plan payments have become unaffordable due to a genuine hardship like a job loss or medical crisis. The court must find that you are acting in good faith and not simply trying to game the system because you're tired of making payments.

Critically, conversion can put nonexempt property you managed to keep in Chapter 13 at risk, as a Chapter 7 trustee has the power to liquidate those assets for creditors. The single most important step before filing a motion is to sit down with your attorney to run the means test numbers and audit what you own, because a conversion that frees you from a 5-year plan can backfire if the fresh look at your assets results in losing your car, home, or tax refund.

You can convert from Chapter 13 to Chapter 7 at almost any point in your case, as long as you haven't received a Chapter 7 discharge in the previous eight years and your request is made in good faith. The right to convert is not automatic, but courts generally grant it when your financial circumstances change for reasons beyond your control. Here are the most common situations where conversion is approved:

• You lost your job or had a major income drop. When the monthly income that funded your Chapter 13 plan disappears through no fault of your own, the court recognizes you can no longer afford the repayment terms.
• A medical crisis or disability drained your resources. Unexpected medical bills or an injury that prevents you from working are classic grounds for approval, since they make continued plan payments impossible.
• Your plan payments became unaffordable over time. Even without a single dramatic event, if rising living costs or other ongoing changes make it clear you cannot realistically finish the plan, courts will often allow the switch.
• You did not commit fraud or abuse the system. The judge needs to see that you filed Chapter 13 honestly and are not simply trying to dodge payments after voluntarily quitting a job or hiding assets.
• You qualify for Chapter 7 under the means test. If your current income is low enough, the conversion is straightforward. If your income is higher, you may still convert but must pass the means test based on your current financial picture, not the one from when you first filed.

The key question the court asks is whether your inability to continue the Chapter 13 plan is genuine. If it is, conversion is usually a matter of filing a simple notice with the court.

Courts generally approve a conversion from Chapter 13 to Chapter 7 when continuing the repayment plan is no longer fair or feasible. The decision hinges on proving you didn't act in bad faith and that your financial reality has genuinely shifted against your control. Here are the three most common reasons a judge will allow the switch:

• A Material Change in Circumstances: This is the strongest argument. You must show that a significant event outside your control derailed your payment plan, making it impossible to finish. Classic examples include an involuntary job loss, a medical crisis leading to steep bills and lost income, or a divorce that slashes household income in half. The key is that the hardship is real and lasting, not a temporary setback.
• You've Met Your Plan's 'Best Efforts' Obligation: If your plan was already paying unsecured creditors everything you could reasonably afford, a court may let you convert early. This often applies when you've been paying into the plan for a while and have already paid the equivalent of what those creditors would get in a Chapter 7 liquidation anyway. In this case, continuing the plan serves no additional purpose.
• Clear Lack of Bad Faith and Honest Intentions: The court must believe you filed and operated in good faith. You need transparent financial records and a clean history in the case. This means you didn't hide assets, made your best effort with payments when you could, and aren't converting simply to game the system, like trying to discharge a debt right before a bonus hits your bank account.

Your trustee may object to converting your case from Chapter 13 to Chapter 7 primarily to protect the money that flows to your creditors through your payment plan. Trustees earn a percentage of every dollar they distribute in a Chapter 13, so a switch to Chapter 7 can cut off that administrative income and leave them with less to manage.

However, a trustee's pushback can also signal that your financial picture has improved, and they believe you can still afford to pay something. If your income has risen or you have acquired valuable non-exempt property since filing, the trustee may argue that a Chapter 7 liquidation would actually generate money for creditors and that keeping you in a Chapter 13 repayment plan is the fairer route.

When you convert from Chapter 13 to Chapter 7, the means test date generally shifts to the day you filed your original Chapter 13 case, not the conversion date. This is a huge advantage because it locks in your financial snapshot using older income figures. If your income dropped since the initial filing (which is why most people convert), you won't have to worry about your pre-drop income disqualifying you from Chapter 7.

However, this rule comes with a critical condition. It only applies if you filed your original Chapter 13 case in good faith. If the court believes you filed Chapter 13 without any realistic ability to fund a repayment plan, just to cheat the means test date for a later conversion, the court can reapply the means test as of the conversion date instead. In that scenario, a recent spike in income before the conversion could block your Chapter 7 discharge. If your situation has genuinely changed since your original filing - due to a job loss or medical crisis - this rule is what makes a conversion possible without a fresh means test calculation.

Converting from Chapter 13 to Chapter 7 fundamentally shifts how your property is treated, because Chapter 7 allows a trustee to sell non-exempt assets to pay creditors, while Chapter 13 lets you keep everything as long as you stick to the payment plan. The main risk is losing assets you've been protecting through your plan if they don't fit within your state's exemption rules.

• Your car: Whether you keep it often depends on your loan status and the car's exemption value. If you're current on the loan you can usually keep making payments, but if you own the car outright and its equity exceeds your state's vehicle exemption, the trustee may sell it, give you your exempt portion, and use the rest to pay creditors.
• Your home: In a Chapter 13 you can cure missed mortgage payments over time, but in a Chapter 7 the lender can resume foreclosure once the automatic stay lifts. You can typically keep the house if your equity is fully protected by your state's homestead exemption and you stay current on the mortgage going forward. If you have significant non-exempt equity, the trustee can sell the home.
• Other property: Luxury items, rental properties, cash, investments, or that boat you've been paying down in your plan all become vulnerable. If an item isn't covered by an exemption, the Chapter 7 trustee has the authority to seize and sell it, which is a stark difference from the protection a Chapter 13 plan provides.

Stopping Chapter 13 payments is a serious step that almost always triggers an immediate shift – your case doesn’t simply pause. Once payments stop and you can’t catch up, the court will either dismiss your case or you must seek a conversion to Chapter 7.

Here is what typically happens next, in order:

1. The trustee files a motion to dismiss. Your Chapter 13 trustee monitors payments closely. After you miss one or more payments, they will quickly ask the court to dismiss your case for non-compliance. You’ll receive notice of this motion.
2. The automatic stay evaporates. If the case is dismissed, the bankruptcy protection shielding you from creditors ends immediately. That means foreclosures, wage garnishments, and collection calls you had stopped can legally restart.
3. You file a motion to convert (before dismissal is final). You must act before the judge signs the dismissal order. To keep your case alive, you file a motion to convert your case from Chapter 13 to Chapter 7. This is your primary tool to immediately stop the dismissal process.
4. You qualify for Chapter 7 or the conversion dies. The court won’t grant the conversion automatically. You must prove you now qualify, which usually means passing the Chapter 7 means test using your current income. If your income is still too high, conversion might not be an option.
5. Lost property can be lost permanently. Dropping payments while in a Chapter 13 is a gamble. If the trustee has already sold an asset to pay creditors, you cannot get it back. If you simply stopped paying to try to save a house or car you were behind on, dismissal or a failed conversion will likely let the lender proceed with repossession or foreclosure much faster.

The critical risk is a gap in protection. If your motion to convert is denied and your case is simultaneously dismissed, you could be left with no bankruptcy shield and a worse financial position than before.

Converting from Chapter 13 to Chapter 7 can backfire when you lose an asset you originally filed to protect. The switch resets your property exposure, and assets that were safe in a repayment plan can suddenly become fair game for liquidation.

Here are the main ways the process can turn against you:

• You could lose your home or car. In Chapter 13, you can catch up on missed mortgage or car payments over time. Conversion cancels that protection. If you owe more than the asset is worth or you are behind on payments, the Chapter 7 trustee may sell the property to pay creditors.
• Non-exempt assets become vulnerable. Property that state or federal exemptions do not fully protect, such as tax refunds, rental real estate, or equity in a business, often survives in Chapter 13 because you pay creditors from future income. In Chapter 7, the trustee can seize and sell it immediately.
• Your good-faith filing gets harder to prove. Courts scrutinize debtors who switch chapters right before a major financial improvement, like a bonus or inheritance. If the timing looks strategic rather than forced by circumstance, the judge may dismiss your case entirely.
• A paid-off car can get pulled in. If you finished paying a vehicle loan during your Chapter 13 plan, that car now has unencumbered equity. After conversion, that free-and-clear value is an asset the trustee can target unless an exemption fully covers it.

Before you request a conversion, review your current exemptions with your attorney and check for any new equity or debts you cannot discharge. A small miscalculation can cost you the very property Chapter 13 was designed to shield.

Losing your job mid-plan makes your Chapter 13 payment schedule unworkable, and courts routinely approve conversion to Chapter 7 when you can show the income loss is permanent or long-term. You will need to file a motion with updated pay stubs, a termination letter, or proof of unemployment benefits to demonstrate you no longer have the disposable income required to fund the plan. The means test still applies, but if your current monthly income has dropped below the state median because of the job loss, you likely qualify without a fight.

A severe medical crisis works the same way, but the documentation shifts to medical records, disability insurance statements, and a letter from your doctor confirming you cannot return to work for the foreseeable future. Mounting medical bills that outstrip your ability to pay the Chapter 13 plan are also a valid reason courts accept, since forcing you to stay in an impossible repayment schedule helps nobody. Just know that any non-exempt assets you acquired or paid down during the Chapter 13 may now be at risk in the Chapter 7 estate, so review that exposure with your attorney before filing the motion.