What Is The Chapter 13 Hardship Discharge?

What Is The Chapter 13 Hardship Discharge?

When a debtor qualifies for a Chapter 13 debt reorganization, he or she may enjoy many protections through the bankruptcy. These include shelter from collections tactics.

Unlike a Chapter 7 bankruptcy, which requires a debtor to forfeit his or her property to obtain a debt discharge, Chapter 13 allows debtors with sufficient income to repay all or a portion of their debt without forfeiting property. However, in some cases, a debtor undergoing a Chapter 13 bankruptcy falls on unexpected financial difficulties, and the repayment plan approved under bankruptcy is no longer feasible.

In cases like this, it is sometimes possible to seek a hardship discharge. Under a hardship discharge, the debtor still receives relief from some or all of his or her debt but does not have to complete the plan. Understandably, court are hesitant to simply hand these discharges out without carefully scrutinizing the circumstances of a debtor asking for one.

In order to qualify for a hardship discharge, a debtor must

  • Fail to make payments according to plan, through no fault of their own
  • Have already paid creditors as much or more than they might receive in a Chapter 7 liquidation
  • Have no way to complete a modified version of the existing plan

In many cases, these kinds of hardship discharges are available to those who fall ill and cannot work to pay for their debt

If you suspect that a hardship discharge is your only options, be sure that you understand the many factors at play in your own affairs before moving forward. An experienced bankruptcy attorney can help you address these issues and make sure that you don't overlook critical benefits or protections.