If a Chapter 13 plan stops working, converting to Chapter 7 is usually available, and a debtor who filed Chapter 13 voluntarily generally has the right to convert. The payments stop and the case heads toward a discharge in a few months instead of years.
The cost is that the protections you filed Chapter 13 for go away with it. Mortgage arrears stop being cured. A Chapter 7 trustee starts looking at your non-exempt assets.
When conversion is the right call
- Your income dropped and no modified plan can carry the mandatory claims
- You've decided to give up the house, which was the whole reason for filing 13
- The car you were cramming down got totaled or repossessed and the plan no longer makes sense
- A business closed and the income that funded the plan closed with it
In each of those, Chapter 13 has lost its purpose. Continuing to pay a trustee for a house you're going to lose anyway is money spent on nothing.
What conversion costs you
The mortgage cure ends. Whatever arrears remain are due, and the lender can resume foreclosure once the stay is resolved. A lien strip that hadn't been finalized through plan completion is lost. A cramdown you were partway through is lost, and the full contract balance on that car comes back.
There's a $25 conversion fee, and you'll have to complete the second financial management course if you haven't. You'll also file updated schedules and attend a new 341 meeting with a Chapter 7 trustee, on Zoom like everything else in this district since June 2024.
Exemptions get re-examined
California's two exemption systems are a choice, and the right choice for a Chapter 13 isn't always the right one for a Chapter 7. If you have equity in a home you're now surrendering, the system you originally picked may need a second look.
You have to qualify for Chapter 7
Conversion isn't a bypass around the means test. If your income is above the California median and the means test says you can fund a Chapter 13, the trustee or the U.S. Trustee can object and move to dismiss the converted case. In practice, most people converting have had an income drop, which is exactly what makes them eligible.
“I've converted cases in month four and in month fifty-two. Late conversions are painful, because the money you paid to the trustee went to arrears on a house you're now walking away from. That's the part clients find hardest to hear.”
Naomi Reyes-AshfordWhat happens to money already paid
Funds the trustee holds but hasn't disbursed generally come back to you, minus allowed fees and administrative costs. Money already sent to creditors stays with them. It's not a refund of the whole case, and anyone who tells you otherwise is guessing.
Dismissal versus conversion
They're different exits. Dismissal ends the case with no discharge and puts you back where you started, creditors and all. Conversion continues the case into Chapter 7 and heads toward a discharge. If your goal is to be done with the debt, conversion is usually what you want. If your goal is to refile a fresh Chapter 13 later with better numbers, dismissal may be the move.
Questions we get asked
How long does the converted case take?
Typically three to five months from conversion to discharge, assuming no complications and no asset issues.
Can the trustee take property in the converted case?
Yes. A Chapter 7 trustee can liquidate non-exempt assets. Run your exemptions again before converting, not after.
Can I convert back to Chapter 13 later?
Sometimes, though the right to convert isn't unlimited and courts look closely at repeated switching.
Do I get a discharge of everything?
Chapter 7 discharges less than Chapter 13 in some categories. Certain debts dischargeable only in Chapter 13 survive a Chapter 7. Ask which of your debts are affected.
What to do next
Write down what changed and when, and list every asset you own with a current value. We'll re-run the exemptions and the means test before filing anything, so you know what a Chapter 7 would actually look like for you.