Committing to continuing payments over a three to five year period without any defaults whatsoever is an enormous challenge. This is the commitment Louisiana consumers make when they file for Chapter 13 bankruptcy. However, circumstances can change significantly during that time — job loss, medical emergencies and other problems can jeopardize a consumer’s chances of maintaining payments. This can lead to the court dismissing the case, subjecting the consumer to creditor harassment and potential foreclosure all over again.

Converting to Chapter 7 is the choice of many consumers in that position. It may mean some assets will be liquidated, but the automatic stay will continue to provide protection against creditors. Filing a Notice of Conversion with the court and paying a small fee can secure the conversion. However, the court may require the individual to complete a Means Test to determine eligibility for Chapter 7. If that person previously failed the test because his or her income was too high, job loss may now lead to a successful test.

Once the court converts the case from Chapter 13 to Chapter 7, the trustee will refund any money held for distribution to creditors. A new creditor’s meeting may be held, where a new trustee will be present. The consumer will have to present new financial statements before the case proceeds in the format typical for Chapter 7 bankruptcies.

Converting a Chapter 13 bankruptcy to Chapter 7 is a serious step to take and one that could have significant consequences. Any Louisiana consumer who is unsure whether this is the appropriate choice for his or her circumstances can consult with an experienced bankruptcy attorney who can also explain other available options. This may allow the consumer to make informed decisions and proceed in the chosen way with the guidance and support of the lawyer.

Source: superpages.com, “Converting from Chapter 13 to Chapter 7“, Accessed on Jan. 13, 2017