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Hardship Discharge Chapter 13

What is Chapter 13 bankruptcy? A Chapter 13 filing can be an effective way for people to get back on their feet.

Chapter 13 basically gives filers a chance to repay many of their debts over time (and often interest-free) while under the protection of the bankruptcy court.

But what happens when a filer is unable to continue making payments according to the repayment plan? That's where Chapter 13's hardship discharge comes in.

What Is the Chapter 13 Hardship Discharge?

Essentially, the hardship discharge allows a Chapter 13 bankruptcy filer to cancel his or her bankruptcy case and repayment plan because of financial circumstances beyond his or her control. These are the specific criteria a filer must meet in order to qualify for a Chapter 13 hardship discharge:

  • Circumstances were beyond filer's control: One reason a person might seek a hardship discharge in Chapter 13 is because of job loss from a layoff or because of an injury or illness that made a person unable to continue performing his or her job. Circumstances like these that were not caused directly by the filer may make a filer eligible for a hardship discharge.
  • Creditors have been adequately compensated: In a Chapter 7 bankruptcy filing, creditors are repaid partially by a liquidation of the filer's assets. If a filer is at a point in his Chapter 13 case where he or she has already repaid his creditors at least as much money as they would have received in a Chapter 7 filing, the hardship discharge may be possible.
  • Chapter 7 conversion is not possible: Finally, in order to qualify for the Chapter 13 hardship discharge, a filer's case must not be eligible for conversion to a Chapter 7 bankruptcy case. The conversion works by allowing a filer to stop making payments to creditors (with possible surrender of property) and to have eligible debts discharged. Conversion to Chapter 7 requires that filers pay a conversion fee and file paperwork with the bankruptcy court.

Learn More about the Chapter 13 Hardship Discharge

If you're interested in learning more details about the hardship discharge in Chapter 13 bankruptcy or determining whether you might qualify for a Chapter 13 hardship discharge, please fill out this form to speak with a bankruptcy lawyer.

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