For many people, their Chapter 13 Bankruptcy repayment plan is appropriate, affordable and manageable, and means that they are able to pay back their debts.
However, for some people, it’s not, and they can’t pay back their debts, which is where the Chapter 13 Hardship Discharge comes in.
Here’s what you need to know about the Chapter 13 Hardship Discharge.
1. Change of circumstances
A change of circumstances might mean you can’t complete your Chapter 13 repayment plan.
Perhaps your household is down to a single income due to unemployment, or you need to look after an ill child or relative so you can now only work part time instead of full time, or perhaps you’re not well enough to work at all anymore.
2. Debtors may ask the Court to grant a ‘hardship discharge’
If you are experiencing financial issues and are struggling to make your Chapter 13 payments, then you can apply to the court and ask for a Chapter 13 Hardship Discharge.
3. Relevant Circumstances
Generally a Chapter 13 Hardship Discharge can be granted if the following 3 conditions are met:
- The circumstances are absolutely beyond the debtor’s control
- Creditors have received as much as they would under a Chapter 7 Bankruptcy
- Modifying the plan is not possible
4. What counts as circumstances beyond the Debtor’s control?
Situations such as injury or illness which stops you from being able to work, or the death of a loved one which reduced your household income could be sufficient to invoke the Hardship Discharge.
Simply racking up other debts, or being fired for poor performance or other offences at work would not make you eligible.
5. More limited than a standard Chapter 13 bankruptcy case
There are strict criteria that must be met for a Hardship Discharge to be granted by the court and so you will need additional help of your bankruptcy attorney.
They will already know your case and circumstances, and will be able to help you present your case to the court.
If you are struggling to repay your Chapter 13 bankruptcy plan, through no fault of your own, then you need to speak to your bankruptcy attorney to see if you qualify for a Hardship Discharge.
An easier alternative might be to convert your case to Chapter 7 Bankruptcy.