11 U.S.C. Section 1307 - Conversion or Dismissal of Chapter 13 Case

What Is Section 1307?

Section 1307 controls how a Chapter 13 case ends short of full plan completion: either by conversion to a different chapter (typically Chapter 7, sometimes Chapter 11 or 12) or by outright dismissal. The provision is one of the most frequently invoked in Chapter 13 practice, because the long plan term and the broad menu of disqualifying events mean that many Chapter 13 cases do not reach the planned completion.

Section 1307 addresses three principal scenarios: (1) voluntary conversion or dismissal by the debtor; (2) involuntary conversion or dismissal "for cause" upon motion of a party in interest or the U.S. Trustee; and (3) mandatory conversion or dismissal in narrowly defined circumstances.

Voluntary Conversion: Section 1307(a)

Section 1307(a) provides: "The debtor may convert a case under this chapter to a case under chapter 7 of this title at any time. Any waiver of the right to convert under this subsection is unenforceable." The right is framed as absolute. The "any waiver . . . is unenforceable" sentence prevents creditors from extracting waivers as the price of plan provisions or other accommodations.

The right to convert to Chapter 7 is one of the principal architectural features of Chapter 13: a debtor who enters Chapter 13 to attempt a wage-earner restructuring is not trapped if circumstances change. Loss of employment, divorce, illness, or simple recognition that the plan was over-optimistic can all trigger conversion to Chapter 7, where the debtor can seek a clean discharge of dischargeable debts.

Voluntary Dismissal: Section 1307(b)

Section 1307(b) provides: "On request of the debtor at any time, if the case has not been converted under section 706, 1112, or 1208 of this title, the court shall dismiss a case under this chapter. Any waiver of the right to dismiss under this subsection is unenforceable." Like 1307(a), the text frames the right as absolute and prohibits waiver.

Voluntary dismissal returns the parties to their pre-petition status (subject to any orders entered during the case and to the consequences of any plan payments already made and distributed). The debtor leaves Chapter 13 without a discharge but also without the asset-liquidation consequences of conversion to Chapter 7. Dismissal is often the chosen exit when the debtor has accomplished an interim objective (cured a mortgage arrearage to forestall foreclosure long enough to refinance, for example) without need to complete the full plan.

The Marrama Bad-Faith Gloss

The Supreme Court's decision in Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365 (2007), held that the analogous Section 706(a) conversion right (from Chapter 7 to Chapter 13) is not so "absolute" that it must be honored where the debtor's conduct is in bad faith and the case would be subject to immediate reconversion or dismissal under Section 1307(c). Although Marrama arose under Section 706(a), most courts have applied parallel reasoning to Section 1307(a) and 1307(b): a textually absolute right may be denied if exercise would constitute "atypical" abuse rising to the level of bad faith.

The Supreme Court's more recent decision in Law v. Siegel, 571 U.S. 415 (2014), tempered Marrama by emphasizing that bankruptcy courts cannot use Section 105(a) to "contravene specific statutory provisions." After Law, lower courts have been more cautious about denying express rights such as the 1307(b) dismissal right; some circuits hold the right truly absolute, others continue to follow Marrama's atypical-bad-faith approach. The split remains unresolved.

For-Cause Conversion or Dismissal: Section 1307(c)

Section 1307(c) enumerates 11 specific "cause" grounds for involuntary conversion or dismissal, "whichever is in the best interests of creditors and the estate":

• (1) Unreasonable delay by the debtor that is prejudicial to creditors;
• (2) Nonpayment of any fees and charges required under chapter 123 of title 28;
• (3) Failure to file a plan timely under Section 1321;
• (4) Failure to commence making timely payments under Section 1326;
• (5) Denial of confirmation of a plan under Section 1325 and denial of a request made for additional time for filing another plan or a modification of a plan;
• (6) Material default by the debtor with respect to a term of a confirmed plan;
• (7) Revocation of the order of confirmation under Section 1330, and denial of confirmation of a modified plan under Section 1329;
• (8) Termination of a confirmed plan by reason of the occurrence of a condition specified in the plan other than completion of payments under the plan;
• (9) Only on request of the United States Trustee, failure of the debtor to file, within fifteen days, or such additional time as the court may allow after the filing of the petition commencing such case, the information required by paragraph (1) of section 521(a);
• (10) Only on request of the United States Trustee, failure to timely file the information required by paragraph (2) of section 521(a); and
• (11) Failure of the debtor to pay any domestic support obligation that first becomes payable after the date of the filing of the petition.

The list is non-exclusive; courts may find "cause" outside these enumerated grounds. The most heavily litigated grounds in practice are (4) (failure to make plan payments) and (6) (material default under a confirmed plan), which together account for the majority of contested dismissal motions filed by trustees and secured creditors.

Conversion to Chapter 11 or 12: Section 1307(d) and (g)

Section 1307(d) authorizes conversion to Chapter 11 or 12 "at any time before the confirmation of a plan under section 1325" upon request of a party in interest or the U.S. Trustee, "after notice and a hearing, for cause." Section 1307(g) provides limits: the court may not convert to Chapter 7, 11, or 12 if the debtor is a farmer or family farmer (Section 101(20) or 101(18)) unless the debtor requests such conversion. The Chapter 12 carve-out reflects Congress's intent to protect family-farmer debtors from being forced out of Chapter 12's specialized agricultural framework.

Effect of Dismissal: Section 349

The consequences of dismissal under Section 1307 are spelled out in Section 349. Dismissal generally reinstates the position of the parties as it existed pre-petition, including reinstatement of stayed proceedings, voided transfers, and avoided liens. The dismissal order may, however, retain certain orders or be entered "without prejudice" or "with prejudice" with consequences for the debtor's ability to refile. A serial-filer debtor may face Section 109(g) eligibility bars or Section 362(c)(3) stay-limitation consequences in any subsequent filing.

Common Procedural Postures

• Standing-trustee motions to dismiss for plan-payment default under Section 1307(c)(4) or (6) (the most common Chapter 13 motion in many districts);
• Secured-creditor motions to dismiss or convert based on material default on direct-pay mortgage cures or post-petition mortgage payments;
• U.S. Trustee motions for failure to file required documents (1307(c)(9) and (10));
• Debtor-initiated 1307(a) conversion to Chapter 7 in response to changed circumstances, often paired with a fresh exemption schedule and a Section 348(f) snapshot determination;
• Debtor-initiated 1307(b) voluntary dismissal after accomplishing an interim objective, sometimes contested by trustees or creditors invoking Marrama bad-faith arguments.

Related Bankruptcy Code Sections

• Section 348 - Effect of conversion (especially 348(f) for Chapter 13-to-7)
• Section 349 - Effect of dismissal
• Section 706 - Conversion of Chapter 7 (subject of Marrama)
• Section 1112 - Conversion or dismissal of Chapter 11
• Section 1208 - Conversion or dismissal of Chapter 12
• Section 109(g) - 180-day bar on refiling after dismissal
• Section 362(c)(3) and (4) - Stay limitations in repeat-filer cases