What is a Hardship Discharge?

Many times during the life of a Chapter 13 case, one of my clients will call and tell me they want a hardship discharge because they cannot make their Chapter 13 payments any longer.  Here are the requirements to qualify to seek a hardship application in Chapter 13 bankruptcy:

1. Your Chapter 13 plan has been confirmed by the court.
2. After your confirmation, circumstances have changed to the point you are unable to complete payments under your confirmed Chapter 13 plan.
3. That your failure to complete payments under the plan is due to circumstances for which you should not justly be held accountable.
4. Under your Chapter 13 plan, you have paid your unsecured creditors what they would have received had you filed Chapter 7.
5. That your Chapter 13 is cannot be modified or is not practicable. (For example, you have been in Chapter 13 for the maximum five years.)
6. That you have completed an instructional course concerning personal financial management or an order has entered waiving this requirement.
7. And that you have not received a discharge under Chapter 7, 11, or 12 in a case filed during the 4-year period preceding the filing of the instant case and has not received a discharge under chapter 13 in a case filed during the 2-year period preceding the filing of the instant case.

If you meet all of these requirements, an application for a Hardship Discharge can be filed.  The court will set a hearing and give creditors or any party in interest an opportunity to respond.  Please keep in mind that any unpaid secured creditors’ lien will survive the hardship discharge.  For example, if the trustee has not paid $1,500 left owing on your car, you will not receive the title until the debt is paid off direct by you.  Call your attorney if you believe you fit the criteria to seek a hardship discharge.