Bankruptcy is a legal process that allows individuals and businesses to eliminate or restructure their debts under the supervision of a court. Chapter 13 bankruptcy is a popular option for individuals who have a steady income but are struggling to pay their debts. It involves creating a repayment plan that allows the debtor to pay off their debts over three to five years. However, circumstances may arise that prevent the debtor from completing the plan. In such situations, the debtor may ask the court to grant a "hardship discharge." In this article, we will discuss the Chapter 13 hardship discharge and its requirements.
What is the Chapter 13 hardship discharge?
The Chapter 13 hardship discharge is a discharge that is available to debtors who are unable to complete their repayment plan due to circumstances beyond their control and through no fault of their own. It is more limited than a regular discharge and does not apply to any debts that are nondischargeable in a Chapter 7 case.
Requirements for a Chapter 13 hardship discharge
To qualify for a Chapter 13 hardship discharge, the debtor must meet the following requirements:
Failure to complete plan payments: The debtor's failure to complete plan payments must be due to circumstances beyond their control and through no fault of their own. For example, a serious illness or injury that prevents the debtor from working may be considered a valid reason.
Creditors received at least as much as in a Chapter 7 case: The debtor must have paid creditors at least as much as they would have received in a Chapter 7 liquidation case. This requirement ensures that creditors are not disadvantaged by the hardship discharge.
Modification of the plan is not possible: The plan cannot be modified to accommodate the debtor's situation. For example, if the debtor's income has decreased, a modification of the plan may be possible instead of a hardship discharge.
Limitations of a Chapter 13 hardship discharge
Chapter 13 hardship discharge does not apply to any debts that are nondischargeable in a Chapter 7 case. Nondischargeable debts include certain taxes, student loans, and debts incurred through fraud or intentional misconduct.
The Chapter 13 hardship discharge is a discharge that is available to debtors who are unable to complete their repayment plan due to circumstances beyond their control and through no fault of their own. To qualify for a hardship discharge, the debtor must meet certain requirements, including paying creditors at least as much as they would have received in a Chapter 7 case. It is important to note that a hardship discharge does not apply to non-dischargeable debts. If you are considering Chapter 13 bankruptcy and have questions about the hardship discharge, consult with an experienced bankruptcy attorney.
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