Difference Between Chapter 7 and Chapter 13

• A Chapter 7 bankruptcy filing requires a debtor to liquidate his or her assets in order to pay creditors and fully eliminate the debt. Known as the "Wager Earners Plan," Chapter 13 allows debtors to keep their property and make monthly payments to the bankruptcy trustee, who distributes the funds to creditors. Chapter 13 payments usually last from three to five years.
  
  

Converting Chapter 13 to Chapter 7

• If a debtor does not make regular payments under Chapter 13, the court may file a motion to dismiss the case. In some instances, a Chapter 13 may convert to a Chapter 7, which offers relief from monthly payments. An attorney should file the petition to convert the case and, after reviewing supporting documentation, the courts make the final decision.
  
  

Motion Denied

• If the courts deny the conversion from Chapter 13 to Chapter 7, the debtor may ask the attorney to file a motion for reconsideration, petition the court to reinstate the case, or file a new Chapter 13 case. If the motion is again denied, the debtor may choose such alternatives as negotiating with creditors or consulting a reputable credit counseling or consolidation company.