Trustee Blog

Conversion from Chapter 13 to Chapter 7

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Riverside Chapter 7 Trustee Steve Speier’s meeting of creditors last week had several cases that were converted from chapter 13 to chapter 7. This cases are interesting because they were confirmed with the clients having the ability to make payments to the chapter 13 trustee and now the clients cannot make the payments.

From a chapter 7 trustee’s perspective, the chapter 7 trustee would want to know why the case was converted? Last week, one couple said that they converted because she had lost her job. She no longer had the income to pay the monthly chapter 13 plan payment. Once she said that, the Mr. Speier knew she was a candidate for chapter 7 and the conversion made sense.

I have seen cases where the debtor converted to chapter 7 because “he did not want to make the chapter 13 plan payment anymore.” The debtor had the same income and the same situation, but got tired of making the payments. In that situation situation, the United States Trustee usually steps in and files a motion to dismiss the case for “abuse”. The chapter 7 trustee reviews the case and then makes a “707b” referral to the US Trustee.

The UST then review the case and asks for more information from the debtor. If the debtor can afford to make a chapter 13 plan payment, then the matter is brought to the Judge. The Judge then decides if the debtor should stay in chapter 7 or move back to chapter 13 or the case should be dismissed.

Practice Pointers: When converting from Chapter 13 to Chapter 7, be sure to amend the petition to show that the Debtor now qualifies for chapter 7. This involves showing the income on schedule “I” is no longer sufficient to make a plan payment. Or amending Schedule “J” to show that the expenses have increased to make the plan payment not feasible.

Remember that any change to the petition must be backed up by evidence. The Chapter 7 Trustee like Mr. Speier or the United States Trustee can ask for back up support for any amendments. So keep the evidence in your file to prove that the amendments are valid.

Practice Pointer #2: When converting from chapter 13 to chapter 7. send the new chapter 7 trustee a copy of the last filed tax returns. The debtor may have provided the chapter 13 trustee a copy of the tax return, but the chapter 13 trustee does not share his file with the chapter 7 trustee. So send a new copy of the recent tax return to the chapter 7 trustee.

Practice Pointer #3: In addition send to the chapter 7 trustee a copy of the amendments made in the case to show the debtor now qualifies for chapter 7. Yes the trustee will receive the amendments by ECF, but take the time to provide the trustee with the amendments AND and explanation of why the debtor now qualifies for chapter 7. This explanation will allow the chapter 7 trustee to quickly evaluate the case and not have to spend time at the creditor’s meeting going into the details.


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