What is a chapter 13 hardship discharge?

Chapter 13 is a bankruptcy option which allows people to get back on track financially by paying off unsecured and secured debts. Chapter 13 cases generally last three to five years and require individuals to pay creditors through a repayment plan. The repayment plan requires individuals to make monthly payments to a bankruptcy trustee until debts are satisfied. However, in some instances when people can’t continue to pay, a chapter 13 hardship discharge is available.

A chapter 13 hardship discharge is when individuals are released from the obligation of paying their debts through their repayment plan. This means that most debts are eliminated even though creditors aren’t fully paid. Also, a chapter 13 hardship discharge means that creditors in the repayment plan can’t start or continue any debt collection activities, such as foreclosures or lawsuits, because they aren’t paid in full. The debts not discharged are generally income debts that are long-term obligations like child support, home mortgage and student loans. In other words, individuals are still responsible for keeping those debts current.

The reason for a chapter 13 hardship discharge is because of a sudden change in circumstances. For instance, a sudden loss of job or a debilitating illness are some reasons the U.S. Bankruptcy Courts grant a hardship discharge.

According to the U.S. Bankruptcy Courts, a chapter 13 hardship discharge is complex and has many requirements. Therefore, individuals should consult a lawyer specializing in chapter 13 hardship discharge prior to filing.