Why & When To Convert Chapter 7 To Chapter 13 In Austin?

TL;DR:

• Converting from Chapter 7 to Chapter 13 may be a smart move given the right conditions.
• You’re at risk of losing property in Chapter 7.
• You have a steady income and can fund a repayment plan.
• You want to catch up on mortgage or car payments.
• Creditors challenge your Chapter 7 eligibility through the means test.
• An Austin bankruptcy attorney can help you decide whether conversion protects your assets and financial future.

Filing for Chapter 7 bankruptcy in Austin, Texas, can provide quick debt relief, but sometimes circumstances change. In those situations, converting to Chapter 13 may be the better path.

Conversion isn’t about failure; it’s about flexibility. The bankruptcy code allows you to switch chapters when your goals shift or your income improves. You can also do this to protect property instead of a fast discharge.

Why Conversion From Chapter 7 To Chapter 13 Is Allowed

Bankruptcy isn’t one-size-fits-all. Sometimes what starts as a straightforward Chapter 7 case needs to shift to Chapter 13. The law anticipates this and gives debtors the right to convert.

The Legal Basis

Under 11 U.S.C. § 706(a), a debtor may convert a Chapter 7 case to Chapter 13 at almost any time, provided they qualify for Chapter 13. The court generally allows this because bankruptcy can give honest debtors a fair chance at relief, not trap them in the wrong chapter.

Protecting Property

The biggest reason conversion is allowed is fairness. In Chapter 7, the trustee may sell nonexempt property to pay creditors. If you realize mid-case that you might lose property you want to keep, conversion offers a way out.

Chapter 13 lets you protect assets while catching up on payments through a plan.

Shifting Financial Circumstances

Conversion also makes sense when income improves. You may have a new job or a consistent side income after filing. While that could disqualify you from Chapter 7 discharge, it also makes you a better fit for Chapter 13 repayment.

Balancing Interests

Creditors benefit from Chapter 13 because they receive partial repayment instead of nothing. Debtors benefit because they keep their property and avoid losing valuable assets. The law balances both sides by keeping conversion an option.

Why This Flexibility Matters

Bankruptcy is about second chances. By allowing conversion, the system recognizes that life changes quickly. Instead of punishing you for filing under Chapter 7 first, the law gives you space to adjust your path.

Signs It May Be Time To Convert Your Case

Not every Chapter 7 filer needs to convert, but certain red flags signal that Chapter 13 may serve you better. Recognizing these signs early can save both time and stress.

Risk Of Losing Property

If the trustee identifies nonexempt property, you may face liquidation. It could mean losing a second vehicle, valuable equipment, or even part of your home equity. Conversion lets you keep these assets while paying creditors over time.

Mortgage Or Car Payments Behind

Chapter 7 doesn’t give you a way to catch up on secured debt. If you’re already behind on a mortgage or car loan, conversion to Chapter 13 allows repayment of arrears over three to five years.

Income Too High For Chapter 7

Sometimes the means test disqualifies you from Chapter 7 discharge. If your disposable income is above the threshold, creditors may challenge your case. Conversion avoids dismissal and puts you on a structured repayment track.

Long-Term Goals Shift

You filed Chapter 7 hoping for quick relief, but your priority has shifted to saving your property or keeping a car. Chapter 13 is better suited to those longer-term goals.

Pressure From Creditors

If creditors contest exemptions or push back against your Chapter 7 filing, conversion can reduce conflict. In Chapter 13, they have assurance for repayment, which often makes the process smoother.

Recognizing these signs doesn’t mean you chose wrong at the start. It simply means circumstances changed, and the law gives you room to adapt.

Key Differences Between Chapters 7 & 13

To understand why conversion might help, it’s useful to compare the two chapters side by side. Each has distinct benefits depending on your financial situation and goals.

What This Means For You

Chapter 7 is for a fast financial reset. It clears debt quickly but may cost you property. Chapter 13 is slower but more protective, especially if you’re behind on secured debts.

Why Conversion Fits

Suppose your original Chapter 7 filing doesn’t align with your goals; conversion bridges the gap. It’s whether due to property risks, income changes, or creditor pressure. It allows you to shift from a liquidation approach to a repayment plan without starting from scratch.

This flexibility is often what makes the bankruptcy system work for real people living in changing circumstances.

Conversion Steps From Chapter 7 To 13

Converting your case isn’t as complicated as filing from scratch, but it does involve a few key steps. Knowing what to expect can make the process smoother.

1. File A Motion To Convert

Your attorney files a motion with the court requesting conversion under 11 U.S.C. § 706(a). In most cases, the court grants the request unless there’s evidence of bad faith.

2. Submit Chapter 13 Forms

You must file updated paperwork for Chapter 13. It includes income and expense schedules, a list of assets and debts, and your proposed repayment plan.

3. Attend A New 341 Meeting

Even if you already attended a creditor meeting under Chapter 7, you’ll attend another one for Chapter 13. The trustee reviews your repayment plan, and creditors may raise objections.

4. Begin A Payment Plan

With Chapter 13, you don’t get to wait around for approval; you usually start making payments within 30 days of filing your plan. Making those early payments shows the court you’re serious and helps build credibility for your case.

5. Court Confirms Your Plan

After reviewing your income, expenses, and creditor claims, the court either confirms or requires adjustments to your repayment plan. Once confirmed, you’ll follow it for 3–5 years.

6. Receive Your Discharge

When you complete your plan, remaining eligible unsecured debts are discharged. At that point, you’ve officially shifted from a liquidation case to a repayment case and gained the benefits of Chapter 13.

Conversion doesn’t erase your progress; it builds on it, giving you a new structure for moving forward.

Questions To Ask Before Deciding On Conversion

Converting from Chapter 7 to Chapter 13 is a major step. Asking the right questions helps you figure out whether it’s the smart move for your situation.

How Far Behind Am I On Secured Debts?

Mortgage and car loan arrears can’t be resolved in Chapter 7. If you’re behind and want to keep those assets, conversion may be the only way to get back on track.

Can I Handle A Three- To Five-Year Commitment?

Chapter 13 takes time. It’s not a quick discharge, but a structured repayment. If you’re ready for a long-term plan that ends in protection and discharge, conversion makes sense.

What’s My Priority, Speed Or Security?

If clearing unsecured debt fast is your top goal, Chapter 7 might be enough. But if keeping property and reducing creditor pressure matters more, Chapter 13 may be worth the shift.

Taking time to answer these questions honestly helps you avoid regret later.

Finding The Right Path Forward

Converting from Chapter 7 to Chapter 13 isn’t about mistakes. It’s about making sure the bankruptcy process works for your unique situation. Sometimes, quick relief is enough. But other times, the security of protecting property and catching up on debt makes conversion the smarter choice.

If you’re in Austin, Texas, you don’t have to navigate this decision on your own. Many people start in Chapter 7 only to realize that their goals shift once the case unfolds. That flexibility is built into the law, and with the right guidance, it can work in your favor.

Talking through your income, property, and long-term financial plans with a trusted advisor makes the path clearer. Whether you stay in Chapter 7 or move into Chapter 13, choosing the option that protects your future matters most.

If you’re weighing whether to convert your case or wondering how the choice might impact your property, let’s talk. At Austin Bankruptcy Lawyers, a Division of Kannon Moore Law, we’re ready to listen. Let’s get started, so you will have answers tailored to your situation and a plan you can feel confident about.