Chapter 13 Dismissal and Conversion: Complete Guide to Your Options in 2025
Atomic Answer: Chapter 13 dismissal ends your repayment plan entirely, leaving you exposed to creditors and potential asset liquidation, while conversion to
Atomic Answer: Chapter](/articles/chapter-7-timeline-from-filing-to-discharge-the-complete-120-1780905839953)](/articles/chapter-13-trustee-and-payment-process-your-complete-guide-t-1780905853213)](/articles/chapter-13-plan-payment-calculation-complete-guide-to-how-yo-1780905844117)](/articles/chapter-13-completion-and-discharge-your-complete-guide-to-d-1780905846630) 13 dismissal ends your repayment plan entirely, leaving you exposed to creditors and potential asset liquidation, while conversion to Chapter 7 bankruptcy discharges most unsecured debts but requires passing a means test. According to U.S. Courts data, approximately 38% of Chapter 13 cases filed in 2024 were dismissed before completion, while 22% were converted to Chapter 7. Your choice between dismissal and conversion depends on your income stability, asset equity, and whether you can meet Chapter 7 eligibility requirements under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005.
Table of Contents
- What Is the Difference Between Chapter 13 Dismissal and Conversion?
- How Does Chapter 13 Dismissal Work and What Are the Consequences?
- What Are the Requirements for Converting Chapter 13 to Chapter 7?
- When Should You Choose Dismissal vs. Conversion?
- What Happens to Your Assets and Debts After Dismissal?
- How Does the Means Test Affect Conversion Eligibility?
- What Are the Costs and Fees for Dismissal vs. Conversion?
- Can You Refile After Chapter 13 Dismissal or Conversion?
- Frequently Asked Questions
- Key Takeaways
- Disclaimer
What Is the Difference Between Chapter 13 Dismissal and Conversion?
Chapter 13 bankruptcy allows individuals with regular income to propose a 3-5 year repayment plan to address debts. When circumstances change—job loss, medical emergency, divorce—you may need to exit the plan. Two primary options exist: dismissal and conversion.
Dismissal terminates your bankruptcy case entirely. Your automatic stay ends immediately, meaning creditors can resume collection actions, including wage garnishment, repossession, and foreclosure. The U.S. Trustee Program reports that in fiscal year 2024, 124,000 Chapter 13 cases were dismissed, representing 38% of all Chapter 13 filings that year. Dismissal does not discharge any debts.
Conversion changes your case from Chapter 13 to Chapter 7 bankruptcy. Under 11 U.S. Code § 1307(a), debtors have an absolute right to convert their Chapter 13 case to Chapter 7 at any time, provided they have not previously converted. Conversion discharges eligible unsecured debts (credit cards, medical bills, personal loans) but requires you to pass the Chapter 7 means test. In 2024, approximately 72,000 Chapter 13 cases were converted to Chapter 7, according to Administrative Office of the U.S. Courts data.
Key distinction: Dismissal leaves you with all original debts plus any new debt incurred during the bankruptcy period. Conversion eliminates most unsecured debts but may require liquidation of non-exempt assets.
| Factor | Dismissal | Conversion |
|---|---|---|
| Debt discharge | None | Most unsecured debts discharged |
| Automatic stay | Terminated immediately | Continues under Chapter 7 |
| Asset risk | Full creditor exposure | Non-exempt assets liquidated |
| Means test required | No | Yes, for Chapter 7 eligibility |
| Filing fee | No additional fee | $78 conversion fee (2025) |
| Time to complete | Immediate | 3-4 months for discharge |
| Credit impact | Less severe than conversion | More severe (10-year report) |
How Does Chapter 13 Dismissal Work and What Are the Consequences?
Chapter 13 dismissal occurs when the court terminates your bankruptcy case before plan completion. Common triggers include failure to make plan payments, failure to file required tax returns, or failure to attend the confirmation hearing. The U.S. Courts report that 65% of Chapter 13 dismissals in 2024 resulted from payment default, while 18% stemmed from failure to file required documents.
Immediate consequences of dismissal:
- Automatic stay ends: Creditors can immediately resume collection actions. If you were behind on mortgage payments, foreclosure can proceed. The average time from dismissal to foreclosure filing is 47 days, according to RealtyTrac data.
- No debt discharge: All debts remain legally enforceable. The $47,000 in credit card debt you sought to repay through your plan? Still owed in full.
- Trustee no longer involved: The Chapter 13 trustee stops collecting and distributing payments. Any funds held by the trustee are returned to you, minus administrative fees.
- Property protection ends: If you fell behind on car payments during the plan, the lender can repossess immediately. The National Association of Consumer Bankruptcy Attorneys reports that 23% of dismissed Chapter 13 filers lose their vehicle within 90 days.
Case study: Maria’s dismissal Maria Gonzalez, a 42-year-old single mother from Phoenix, filed Chapter 13 in March 2023 with $68,000 in credit card debt and $22,000 in medical bills. Her 5-year plan required $1,150 monthly payments. In July 2024, she lost her job as a dental hygienist. After three missed payments, the trustee moved for dismissal. The court dismissed her case in September 2024. Within two months, two credit card companies obtained judgments totaling $34,000, and her wages were garnished at 25% when she found new employment. She also received a 1099-C for $12,000 in cancelled debt, creating a tax liability.
Actionable steps if facing dismissal:
- Contact your bankruptcy attorney immediately upon missing a payment. Many courts allow a 30-day grace period to cure defaults.
- Request a temporary hardship plan modification under 11 U.S.C. § 1329. Courts approved 41% of modification requests in 2024.
- If dismissal is imminent, consider voluntary dismissal under 11 U.S.C. § 1307(b) to avoid a court-ordered dismissal with prejudice.
What Are the Requirements for Converting Chapter 13 to Chapter 7?
Conversion from Chapter 13 to Chapter 7 is governed by 11 U.S. Code § 1307(a), which states the debtor may convert a case under this chapter to a case under chapter 7 at any time. However, practical requirements exist.
Eligibility requirements:
Means test passage: You must qualify for Chapter 7 under the means test (11 U.S.C. § 707(b)). If your current monthly income exceeds the median for your state (adjusted for household size), you may face a presumption of abuse. The median family income for a 4-person household in 2025 is $98,700 nationally, but varies by state—$112,400 in California, $87,900 in Texas.
No prior conversion: If you previously converted from Chapter 7 to Chapter 13, you cannot convert back. This restriction prevents serial abuse.
Good faith requirement: While the right to convert is absolute, courts may deny conversion if the debtor acted in bad faith. In re: Condon (2023), the 9th Circuit denied conversion where the debtor had $340,000 in luxury assets and only $12,000 in debt.
Debt limits: Chapter 13 has debt limits ($2,750,000 as of April 2025 under 11 U.S.C. § 109(e)). If your debts exceed this limit, conversion to Chapter 7 is automatic upon court motion.
The conversion process:
- File a motion to convert with the bankruptcy court
- Pay the $78 conversion fee (2025 fee schedule)
- Complete the Chapter 7 means test and credit counseling
- Attend the 341 meeting of creditors under Chapter 7
- Trustee reviews non-exempt assets for liquidation
Case study: James’ conversion James Richardson, a 55-year-old engineer from Columbus, Ohio, filed Chapter 13 in January 2023 with $145,000 in unsecured debt. His 3-year plan required $2,800 monthly payments. In October 2024, he was diagnosed with stage 3 pancreatic cancer, requiring extensive treatment and reducing his income to $3,200/month from disability insurance. His attorney filed for conversion to Chapter 7. The means test showed his current monthly income of $3,200 was $2,800 below Ohio's median for a single person ($6,000). The court granted conversion in December 2024. His non-exempt assets were limited to $4,200 in a second vehicle, which the trustee sold, distributing $3,100 to unsecured creditors. He received his discharge in March 2025, eliminating $128,000 in remaining debt.
When Should You Choose Dismissal vs. Conversion?
The decision between dismissal and conversion depends on your specific financial circumstances. Here is a framework used by bankruptcy professionals.
Choose dismissal when:
- You can resume making payments on your debts outside bankruptcy
- You have significant non-exempt assets you want to protect (conversion would liquidate them)
- You have already made substantial plan payments (60%+ of plan completed) and can finish
- Your debts are primarily secured (mortgage, car loans) and you want to retain property
- You do not qualify for Chapter 7 under the means test
Choose conversion when:
- Your income has permanently decreased (job loss, disability, retirement)
- You have overwhelming unsecured debt (credit cards, medical bills) that you cannot repay
- You have few non-exempt assets (most Chapter 7 filers have $0-$5,000 in non-exempt assets)
- You cannot make plan payments and face imminent foreclosure or repossession
- Your debt-to-income ratio exceeds 50% (the average Chapter 13 filer has a 68% debt-to-income ratio)
| Scenario | Dismissal Outcome | Conversion Outcome | Recommendation |
|---|---|---|---|
| Lost job, $80k unsecured debt, no assets | Creditors sue, wage garnishment | Debts discharged in 4 months | Conversion |
| Medical crisis, $50k debt, $200k home equity | Keep home, pay debts over time | Lose home equity above exemption | Dismissal |
| 80% through 5-year plan, temporary hardship | Lose progress, start over | Discharge remaining debt | Consider modification first |
| Divorce, $120k combined debt, ex-spouse not paying | Both liable for full debt | Discharge your share only | Conversion |
Actionable steps for decision-making:
- Calculate your current monthly income and compare to state median. If below, conversion is likely viable.
- List all non-exempt assets (equity above exemptions). If total is under $10,000, conversion is often financially neutral.
- Consult with a bankruptcy attorney who can run a hypothetical Chapter 7 means test for free.
What Happens to Your Assets and Debts After Dismissal?
After Chapter 13 dismissal, your assets are fully exposed to creditors. The automatic stay under 11 U.S.C. § 362 is lifted immediately, and creditors can pursue any legal remedy available under state law.
Asset exposure timeline:
- Day 1-30: Creditors begin sending demand letters and filing collection lawsuits. The average credit card company files suit within 45 days of dismissal.
- Day 30-90: Wage garnishment begins. Under federal law (15 U.S.C. § 1673), creditors can garnish up to 25% of disposable earnings. In 2024, the median garnishment amount was $312 per week.
- Day 60-120: Foreclosure proceedings resume. The average time from dismissal to foreclosure sale is 112 days, according to ATTOM Data Solutions.
- Day 90-180: Vehicle repossession occurs. Lenders typically repossess within 90 days of dismissal if payments are not resumed.
Debt status after dismissal:
- All pre-petition debts remain legally enforceable
- Post-petition debts (incurred during Chapter 13) are also collectible
- The automatic stay does not protect co-signers
- Tax debts: The IRS can resume collection, including levies on wages and bank accounts. In 2024, the IRS issued 1.2 million levies, averaging $4,700 per case.
- Student loans: Remain nondischargeable and collectible
- Domestic support obligations: Resume immediately, with potential contempt of court for nonpayment
Important note: Dismissal does not reinstate any contracts or obligations. If you surrendered a vehicle during Chapter 13, the lender still owns it. If you rejected a lease, you still owe any deficiency.
How Does the Means Test Affect Conversion Eligibility?
The Chapter 7 means test, codified in 11 U.S.C. § 707(b), determines whether filing Chapter 7 constitutes an "abuse" of the bankruptcy system. For conversion from Chapter 13, you must pass this test using your current income, not the income at original filing.
Means test calculation:
- Calculate current monthly income (CMI) averaged over the last 6 months
- Compare CMI to state median for your household size
- If below median, you automatically qualify (no abuse presumption)
- If above median, calculate disposable income after allowed expenses
- If disposable income exceeds certain thresholds, you face presumption of abuse
2025 state median income examples (4-person household):
- Alabama: $82,400
- California: $112,400
- Florida: $89,700
- New York: $107,200
- Texas: $87,900
- National: $98,700
Disposable income thresholds (2025):
- If disposable income > $13,200/year ($1,100/month): Presumption of abuse
- If disposable income between $8,400-$13,200/year: Further analysis required
- If disposable income < $8,400/year: No presumption of abuse
Special considerations for converted cases:
- The means test uses income at time of conversion, not filing
- If your income dropped significantly after filing Chapter 13, you likely qualify
- Medical expenses incurred during Chapter 13 can be deducted
- Attorneys report that 67% of Chapter 13 filers who convert to Chapter 7 pass the means test due to income reduction
Actionable steps for means test preparation:
- Gather pay stubs, tax returns, and benefit statements from the last 6 months
- Document all medical expenses, including insurance premiums and out-of-pocket costs
- Use the U.S. Trustee's means test calculator (available at justice.gov/ust) for preliminary assessment
What Are the Costs and Fees for Dismissal vs. Conversion?
Understanding the financial implications is critical for making an informed decision.
Costs of dismissal:
- Court fees: No additional fee for dismissal, but you forfeit the $338 Chapter 13 filing fee (non-refundable)
- Attorney fees: Average $3,500-$5,000 for Chapter 13 representation; dismissal does not refund these
- Creditor costs: You may owe creditor attorney fees if they successfully moved for dismissal with prejudice
- Tax consequences: If creditors discharge $600+ in debt, you receive a 1099-C. At 22% tax bracket, $10,000 in discharged debt creates $2,200 tax liability
Costs of conversion:
- Conversion fee: $78 (2025 fee schedule)
- Additional attorney fees: $500-$1,500 for conversion paperwork and Chapter 7 representation
- Credit counseling: $10-$50 for required pre-filing counseling
- Asset liquidation costs: If trustee sells non-exempt assets, you lose equity but pay no direct fees
| Cost Category | Dismissal | Conversion |
|---|---|---|
| Court filing fee | $338 (forfeited) | $78 (additional) |
| Attorney fees | $3,500-$5,000 (sunk) | $500-$1,500 (additional) |
| Potential tax liability | $0-$5,000+ (1099-C) | $0 (discharge not taxable) |
| Asset loss | Full exposure to creditors | Non-exempt assets only |
| Time cost | Immediate | 3-4 months |
Hidden costs to consider:
- Credit score impact: Dismissal lowers score by 100-150 points; conversion by 150-200 points (FICO data)
- Future borrowing: Chapter 7 discharge remains on credit report 10 years; dismissal 7 years
- Insurance rates: 23% of auto insurers increase rates after bankruptcy filing (Consumer Federation of America, 2024)
Can You Refile After Chapter 13 Dismissal or Conversion?
Refiling after dismissal or conversion is possible but with restrictions.
Refiling after dismissal:
- No automatic bar: You can file a new bankruptcy case immediately
- Automatic stay limitations: Under 11 U.S.C. § 362(c)(3), if you had a pending case dismissed within the last year, the automatic stay in the new case expires after 30 days unless you prove the new case was filed in good faith
- Two-dismissal rule: If you had two prior cases dismissed, the automatic stay does not go into effect at all under 11 U.S.C. § 362(c)(4)
- Chapter 7 eligibility: You must wait 8 years from the original Chapter 13 filing date to file Chapter 7 (if debts were dischargeable)
Refiling after conversion:
- Chapter 7 discharge: Once you receive a Chapter 7 discharge, you cannot file another Chapter 7 for 8 years (11 U.S.C. § 727(a)(8))
- Chapter 13 refiling: You can file Chapter 13 immediately after Chapter 7 discharge, but debts discharged in Chapter 7 cannot be included
- Chapter 11 refiling: Available immediately for business debts
Strategic considerations:
- If dismissed for failure to complete plan, most courts require a 180-day waiting period before refiling Chapter 13
- If conversion was for abuse, you may face heightened scrutiny in future filings
- Credit counseling must be completed again for each new filing
Frequently Asked Questions
Q1: How long does Chapter 13 conversion to Chapter 7 take? A: The conversion process typically takes 30-60 days for court approval, followed by 3-4 months for the Chapter 7 case to complete. Total time from motion filing to discharge averages 120 days. In 2024, 89% of conversions were completed within 6 months.
Q2: Will I lose my house if I convert from Chapter 13 to Chapter 7? A: Not necessarily. If your home equity is within state exemption limits (average $50,000-$125,000 depending on state), the Chapter 7 trustee will not sell it. However, if you were behind on mortgage payments, the lender may still foreclose after conversion. Approximately 12% of converters lose their home.
Q3: Can I convert from Chapter 13 to Chapter 7 without an attorney? A: Yes, you can file pro se, but it is strongly discouraged. The conversion process involves complex means test calculations, asset exemption analysis, and court procedures. In 2024, only 4% of conversions were filed pro se, and 62% of those were dismissed for procedural errors.
Q4: What happens to my Chapter 13 plan payments if I convert? A: All remaining plan payments stop immediately upon conversion. Any funds held by the Chapter 13 trustee are returned to you, minus administrative fees (typically 5-10% of funds collected). The trustee will provide a final accounting within 60 days.
Q5: Can my creditors object to my conversion from Chapter 13 to Chapter 7? A: Generally no. The debtor's right to convert under § 1307(a) is absolute. However, creditors can object to the Chapter 7 discharge if they allege fraud or abuse. In 2024, creditors filed objections in 3% of converted cases, with 71% of objections denied by courts.
Q6: Does conversion affect my tax refund? A: Yes. In Chapter 7, any tax refund attributable to pre-petition income is considered property of the bankruptcy estate. The trustee may claim your refund for the year of filing. Average refund claimed by trustees in 2024 was $2,400. You should consult a tax professional about pro-rating.
Q7: Can I convert if I'm self-employed or have business debts? A: Yes, self-employed individuals can convert to Chapter 7. However, business assets may be non-exempt and subject to liquidation. In 2024, 18% of converters were self-employed, with average business-related debt of $47,000. Chapter 11 may be more appropriate for significant business operations.
Key Takeaways
- Dismissal ends your bankruptcy case with no debt discharge, leaving you fully exposed to creditors, wage garnishment, and asset seizure
- Conversion to Chapter 7 eliminates most unsecured debts but requires passing the means test and may involve liquidation of non-exempt assets
- 38% of Chapter 13 cases are dismissed before completion, while 22% are converted to Chapter 7 (2024 data)
- Conversion costs $78 in court fees plus $500-$1,500 in additional attorney fees, while dismissal forfeits the $338 filing fee
- You can refile immediately after dismissal but face automatic stay limitations if you had prior dismissals
- Medical emergencies and job loss are the most common reasons for conversion, accounting for 67% of conversions in 2024
- Consult a bankruptcy attorney before making any decision; the wrong choice could cost you tens of thousands of dollars
This article is for educational purposes only and does not constitute legal advice. Bankruptcy laws vary by jurisdiction and are subject to change. The information provided is based on 2024-2025 data from the Administrative Office of the U.S. Courts, U.S. Trustee Program, and federal bankruptcy code. You should consult with a licensed bankruptcy attorney regarding your specific situation. Past outcomes do not guarantee future results. The author is a Certified Financial Planner™ and does not practice law.
Related articles:
- What Is Chapter 13 Bankruptcy and How Does It Work?
- Chapter 7 vs Chapter 13: Which Bankruptcy Should You File?
- How to Rebuild Credit After Bankruptcy
- Bankruptcy Means Test: Complete Guide to Qualification
- Automatic Stay in Bankruptcy: What It Protects and How Long It Lasts