Definition of Chapter 13 Hardship Discharge in the Bankruptcy Code

A Chapter 13 hardship discharge is available to debtors under very limited circumstances. Although what constitutes a hardship varies from jurisdiction to jurisdiction, generally a debtor must show that:

He has suffered a catastrophic personal injury or illness which prevents him from working; or
He in unable to work for reasons that are beyond his control.

Even if a Chapter 13 debtor can meet either of these requirements, he still may not be entitled to hardship discharge. He must also prove that:

His general unsecured creditors have received at least as much as they would have received in a Chapter 7 bankruptcy case; and
Modification of his Chapter 13 plan is not feasible.

Does a Chapter 13 Hardship Discharge Relieve a Debtor of Liability for All Debts?

A Chapter 13 hardship discharge is more limited than the discharge a debtor receives after successful completion of a Chapter 13 plan. Debts that are nondischargeable in a Chapter 7 case will not be discharged if a Chapter 13 hardship discharge is granted. The following debts are not included in a Chapter 13 hardship discharge:

Certain tax obligations, such as sales taxes and monies owed to the federal government for tax fraud;
Family support obligations, such as alimony and child support;
Student loans; and
Certain long term credit obligations, such as mortgages and auto loans.

What is the Process for Requesting a Chapter 13 Hardship Discharge?

A debtor must file a Motion for Hardship Discharge before the court will consider granting such a discharge. Once the motion has been filed with the court, it must be served on the Chapter 13 trustee and the creditors who have a specified amount of time to file a response or objection to the motion.

After the motion has been served on the Chapter 13 trustee and the debtor’s creditors, the court will hold a hearing during which all interested parties may present their arguments in support of or in opposition to the debtor’s hardship discharge request. At the end of the hearing, the court will enter a ruling.

Getting Legal Help

Obtaining a Chapter 13 hardship discharge is a complex process. Therefore, a debtor needs to have a knowledgeable and experienced bankruptcy attorney working on his behalf. A bankruptcy attorney will review the facts and circumstances surrounding the debtor’s inability to complete his Chapter 13 case, draft and file the appropriate motion, and argue the case at the hearing. If the debtor’s request for a Chapter 13 hardship discharge is denied by the bankruptcy court, his bankruptcy attorney may be able to assist him in converting to a Chapter 7 case or in dismissing his case and negotiating a settlement with his unsecured creditors.

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