Do You Qualify for a Chapter 13 Bankruptcy Hardship Discharge?

Chapter 13 Bankruptcy is a type of bankruptcy proceeding that was intended for use by individuals who have a steady stream of income, but who cannot pay all of the bills they are required to pay. A Chapter 13 bankruptcy will allow you to make structured settlements with your creditors and repay your debts as you have time and money, without having to liquidate property or lose vital assets such as your home, car, or other possessions. As you know, financial problems can often be compounded by unforeseen circumstances, so what happens if you cannot make the payments on your Chapter 13 bankruptcy as ordered by the court? You may be eligible for a hardship discharge.

What is a Chapter 13 Bankruptcy Hardship Discharge?

A hardship discharge is used in a Chapter 13 bankruptcy proceeding where you have experienced a setback which, through no fault of your own, has limited your income or removed it entirely, rendering you unable to pay the court-ordered payments of your chapter 13 bankruptcy. A chapter 13 bankruptcy typically reduces your debts and gives you a three to five year period to work with a court-appointed trustee, so the first step is to contact your trustee and tell them about your situation.

Do You qualify for a Chapter 13 Bankruptcy Hardship Discharge?

Hardship discharges are typically only granted if the creditors have received at least as much, if not more, than they would have received in a full-liquidation Chapter 7 bankruptcy.

Typically, hardship discharges are only applicable if you can prove that an illness or injury has reduced your capacity to work, and therefore reduced your income, or if you can prove that your injury has prevented you from working altogether. You may have to provide proof of disability or other verifiable evidence that your income stream has been reduced or eliminated.

You will want to contact your trustee as soon as you feel that you will not be able to make your payments in order to avoid fines, penalties, or dismissal of your bankruptcy case for failure to make your court-ordered Chapter 13 payments.

If the court deems that you are acting in good faith, you may be granted a hardship discharge. If you have simply quit your job, or decided you do not wish to repay your debts as agreed, your bankruptcy can be dismissed entirely, or you can have your bankruptcy converted to a Chapter 7 bankruptcy, where your property will be liquidated by a court-appointed administrator and you run the risk of losing your home, car, and other assets at a bankruptcy sale in order to pay your other debts.

Getting Help

You may wish to speak with an experienced bankruptcy attorney before filing a Chapter 13 bankruptcy hardship discharge, as your attorney can help guide you through the process and increase the chances of you getting the hardship discharge you need.

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