Chapter 13 bankruptcy allows a debtor to repay all or part of their debts over a 3 to 5 year period of time. However, some debtors who have filed Chapter 13 bankruptcy may find themselves facing new financial difficulties at some point during the repayment period that prevents them from making agreed upon payments. This reason alone has been major factor is scaring off some debtors from filing Chapter 13 bankruptcy. However, while that fear is understandable, it is unnecessary since bankruptcy law states that a debtor may convert their Chapter 13 bankruptcy to a Chapter 7 bankruptcy at any point during their repayment plan. Below are a few reasons why you may want to convert your Chapter 13 bankruptcy to a Chapter 7 bankruptcy:
- Your financial situation has changed significantly. Maybe you suffered a job loss that prevents you from making payments to the bankruptcy trustee. If so, converting to a Chapter 7 bankruptcy may be a simple and of course logical decision.
- You have suffered an illness that has created medical debt that you can't pay. Medical debt is one of the leading causes of bankruptcy and converting to a Chapter 7 bankruptcy because of medical debt may be a smart choice.
- Your household size has changed. Maybe you just had a child and the increased expenses make it impossible for you to continue your Chapter 13 bankruptcy payments. If this is the case speak with your bankruptcy attorney about how this will impact your ability to file for Chapter 7 bankruptcy. An increase in household size could place you below the median income for Texas.
It's also important to note that if you decide to convert your Chapter 13 bankruptcy into a Chapter 7 bankruptcy any assets you acquired after filing Chapter 13 bankruptcy will be exempt from seizure.