What happens if you start Chapter 13 bankruptcy and lose your job?

If you have made the difficult decision to start a Chapter 13 bankruptcy, you’re not alone. There are many people who elect to go into bankruptcy to get back to a place of financial security, to get their debts on a monthly payment plan they can afford and to have some debts discharged.

Since Chapter 13 bankruptcy can last for three to five years, many things can happen in that time frame. If you lose your job, then you need to know that not all is lost. You may be able to convert your Chapter 13 bankruptcy into a Chapter 7 liquidation bankruptcy instead.

When can you convert your Chapter 13 bankruptcy to Chapter 7?

Usually, once you start a Chapter 13 bankruptcy, you’re expected to finish it. However, if there is a major change in your circumstances, you may be able to have the bankruptcy converted. For example, if you are hurt at work and can no longer bring in an income, then you may be able to convert the bankruptcy into Chapter 7 since your income level has changed.

To convert your Chapter 13 bankruptcy to a Chapter 7 bankruptcy, you will need to complete a means test and show that you don’t have the ability to pay down your debts.

How do you convert a Chapter 13 bankruptcy to a Chapter 7 bankruptcy?

To convert a Chapter 13 bankruptcy to a Chapter 7 bankruptcy, you will need to file a notice with the court and pay any applicable fees. You will also have to prove that you now qualify for Chapter 7 bankruptcy based on your circumstances.

If the change is approved, then the debts that you were once paying on may now be reassessed. If they are unsecured debts, then you may see them dismissed completely, and you won’t have to pay anything else. For some other debts, you may need to decide if you’d like to reaffirm them and keep paying. There are also some debts that won’t qualify for bankruptcy that you will continue to have to pay unless there is an exception due to your circumstances.

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