A Chapter 13 hardship discharge is a way to receive a bankruptcy discharge even if you cannot finish your repayment plan. It is available when circumstances beyond your control, such as a serious illness, disability, or the death of a family member, make it impossible to complete your plan payments. To qualify, you must also show that your creditors have already received at least what they would have gotten in a Chapter 7 case and that changing your plan is not a workable solution. Law Offices of Terrence Fantauzzi helps Chapter 13 filers understand their options when life changes partway through their case.
Why Would Someone Need a Hardship Discharge?
A Chapter 13 plan typically lasts three to five years. That is a long time, and life does not always go as planned. Some filers face unexpected events that make it impossible to keep up with their payments, such as:
- A serious illness or injury
- A permanent disability
- The death of a spouse or other household earner
- A major, lasting loss of income through no fault of your own
Normally, a person who stops making plan payments risks having their case dismissed without a discharge. The hardship discharge exists so that people who have made a real effort, and then faced circumstances outside their control, are not left without relief.
What Are the Requirements for a Chapter 13 Hardship Discharge?
Under federal bankruptcy law, the court may grant a hardship discharge if three conditions are met:
- Circumstances beyond your control. Your inability to finish the plan must be caused by events for which you should not justly be held responsible.
- Creditors received enough. Your unsecured creditors must have already been paid at least as much as they would have received if you had filed Chapter 7 instead.
- Modification is not practical. Adjusting your plan, such as lowering or suspending payments, must not be a realistic option.
You will generally still need to complete the required financial management course and meet other standard discharge requirements. The court has discretion in deciding whether to grant the request.
What Debts Does a Hardship Discharge Cover?
A hardship discharge eliminates most of your remaining unsecured debts, such as credit card balances and medical bills. However, it is narrower than a full Chapter 13 discharge.
A regular discharge at the end of a completed Chapter 13 bankruptcy plan can cover certain debts that a Chapter 7 discharge cannot. A hardship discharge does not provide those extra benefits. Instead, it covers roughly the same types of debts as a Chapter 7 discharge. Debts that typically remain include:
- Most student loans
- Domestic support obligations such as child support and alimony
- Certain tax debts
- Debts arising from fraud or certain other misconduct
What Happens to My House or Car?
A hardship discharge eliminates your personal obligation on many debts, but it does not remove liens on secured property. If you are still paying a mortgage or car loan, the lender’s lien stays in place. To keep the property, you will generally need to continue making payments, and any arrears that were not cured through the plan may still need to be addressed.
Are There Other Options Besides a Hardship Discharge?
Yes, and in many cases another option works better. Before seeking a hardship discharge, your attorney may consider:
- Modifying your plan. If your hardship is temporary or partial, the court may approve lower payments or a short suspension.
- Converting to Chapter 7. If you qualify, converting your case to Chapter 7 bankruptcy may give you a discharge without needing to prove hardship.
- Voluntary dismissal. In some situations, ending the case and refiling later may make sense, though this has drawbacks that should be carefully weighed.
The right choice depends on how much you have paid so far, what property you want to keep, and whether your situation is likely to improve.
How Do You Request a Hardship Discharge?
To request a hardship discharge, your attorney files a motion with the bankruptcy court explaining your circumstances and showing how each requirement is met. Supporting documents, such as medical records, proof of income loss, or a death certificate, help establish that the hardship was beyond your control. The trustee and creditors may respond, and the judge then decides whether to grant the discharge.
What Should You Do if You Are Struggling to Make Plan Payments?
If you are having trouble keeping up with your Chapter 13 payments, act quickly. Contact your attorney as soon as possible, before payments fall too far behind. Early action gives you more options and lowers the risk of your case being dismissed.
Talk to a Bankruptcy Attorney About Your Chapter 13 Case
A sudden hardship does not have to erase years of effort in your Chapter 13 plan. Whether the best option is a hardship discharge, a plan modification, or a conversion, the right guidance can help you protect the progress you have made.
To discuss your situation, contact Law Offices of Terrence Fantauzzi at (909) 552-1238 today.
