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Attorney suffers stroke during bankruptcy procedure

On of the many advantages of employing a bankruptcy procedure is the ability of the courts to discharge a debtor's debts under exceptionally difficult circumstances that are deemed beyond the control of the debtor. This component of bankruptcy is referred to as a hardship discharge. Just such a circumstance was demonstrated recently in a surprisingly literal manner when an attorney undergoing a Chapter 13 bankruptcy was granted a hardship discharge after suffering a stroke that left him unable to practice law.

The conditions for receiving a hardship discharge are fairly specific, even accounting for the presence of a catastrophic event that renders a debtor unable to continue to make payments, such as the lawyer who suffered a stroke. Under current bankruptcy statutes, being granted a hardship discharge requires meeting several standards, in addition to circumstantial difficulties.

In addition to circumstances, the "amount distributed under the plan to unsecured creditors is not less than the creditor would have received in a [chapter 7 bankruptcy] case." Furthermore, the court must also determine that some form of effective modification to the debtor's existing repayment terms cannot be accomplished.

There is a good deal of precedent to establish that courts do generally consider an income-concealing disability or death on the part of the debtor to be sufficient grounds to grant a hardship discharge. Still, in the case of the attorney, the bankruptcy trustee assigned to his case attempted to block the discharge on the grounds that the attorney had experienced medical problems prior to filing for the bankruptcy. This implied that the cause of disability should have been viewed as a pre-existing condition. Thankfully for both the attorney and prevailing decency in the world, the court did not agree.

Clearly, bankruptcy procedures are neither simple nor easily accomplished, but they are a legitimate method for creating a fresh start for those who have fallen on hard times. If you are considering filing for bankruptcy, it is wise to enlist the guidance of an experienced lawyer who can guide you through the process and help you fight to preserve your rights and dignity as you set course for a fresh start.

Source: Bloomberg News, "Attorney Suffering Stroke During Ch. 13 Case Gets Hardship Discharge," Diane Davis, Dec. 06, 2016

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