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Switching from Chapter 13 to Chapter 7 Bankruptcy
When individuals file for bankruptcy, there are 2 basic types of bankruptcy to choose from: Chapter 7 and Chapter 13 (referring to the chapters of the U.S. bankruptcy code in which they appear).
Chapter 7 bankruptcy is basically liquidation – all of the debtor’s assets (besides those which are exempt) are sold to pay off his or her debts. Chapter 13 bankruptcy is a structured repayment plan, and involves a debtor paying off as much of his or her debt as possible over a 3-5 year period.
Sometimes, a debtor who cannot meet the obligations of the payment plan imposed by Chapter 13 Bankruptcy may wish to switch to Chapter 7. This can be done once for any reason, without court approval. However, to switch back, approval of the bankruptcy court is required, and they will rarely allow a debtor to make multiple switches.
Note that in switching from Chapter 13 to Chapter 7, much of the debtor’s property is now up for grabs to be sold off to pay his or her debts. However, if the debtor cannot make the payments under a Chapter 13 bankruptcy, switching to Chapter 7 may be his or her only option.
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