You may be considering Chapter 7 bankruptcy as your answer to get out from under debt. You might not own many assets, so Chapter 7 seems like the proper course of action. You also feel glad that Chapter 7 will only take a few months to complete. Still, it is possible a court might convert your bankruptcy to Chapter 13 under the right circumstances.
You might not be expecting a court to convert your case. It may come as a disruption to your plans. If you know why a court could convert a bankruptcy to Chapter 13, you can factor it into your strategy for getting out of debt.
Reasons a judge may convert a bankruptcy
One of the rationales for using Chapter 7 bankruptcy is that you lack the income or assets to pay off a significant amount of your debt. As a result, Chapter 7 will liquidate some of your assets while allowing you to keep property exempted by law. A judge will discharge the rest of your debt. To qualify for Chapter 7, you must meet a specific means test.
However, it may turn out that you have more in income and assets than the means test allows. As FindLaw points out, if you have a certain amount of disposable income, a court may decide you do not qualify for Chapter 7 and convert your case to Chapter 13.
Converting to Chapter 13 may be beneficial
If a court does convert your case to Chapter 13, you will face a longer bankruptcy period since you will now have to pay back debts over a three to five year period. But a Chapter 13 bankruptcy could be beneficial since you can keep more property and do not face liquidation. You might even find Chapter 13 more desirable and decide to voluntarily convert your bankruptcy.
It is important to make sure your assets line up with a Chapter 7 means test if you envision using Chapter 7 as your preferred bankruptcy. You might be able to convert to Chapter 13, but it is also possible you lack the finances to qualify for Chapter 13 as well. Gather the proper information so you know which form of bankruptcy, if any, is feasible for you.