Can I Seek an Early Discharge in My Chapter 13 Case?

Are you currently considering a Chapter 13 bankruptcy filing, or are you currently in the process of working through the terms of a repayment plan in a Chapter 13 bankruptcy case? If so, you likely know that the terms of a Chapter 13 repayment plan are long. To be sure, Chapter 13 repayment plans typically last for three to five years, and debtors are required to make regular payments for that entire time. It is only once the repayment plan has been completed in full — i.e., once payments have been made consistently for three to five years — that a debtor can be eligible to have remaining debts discharged. This is a long time, and for some debtors, there may be a range of reasons to seek an early discharge of debt.
There are two general ways in which you may be able to complete your Chapter 13 case early: either by paying all of your allowed claims in full, or by requesting a hardship discharge. Our West Palm Beach bankruptcy attorneys can explain the requirements for each of these, and we can help you if you are seeking to end your Chapter 13 case early.
Paying All of the Allowed Claims in Full
Once a repayment plan is approved by the court, with clear details for how all creditors’ claims will be repaid (in whole or in part) based on the terms of the plan, these are what are known as “allowed claims” according to Thomson Reuters. In other words, an “allowed claim” is one that has been approved for payment under your Chapter 13 repayment plan.
The first way to end your Chapter 13 case early is to pay all allowed claims in full earlier than the terms of your plan would have you paying them. You may have additional disposable income during the case that allows you to pay more of what you owe than the regular payment on the reorganization plan, and you may be able to pay off what you have promised to pay early. If so, the remaining debt may be eligible for discharge as if you had completed the terms of the repayment plan. Additional disposable income may come from any lawful source, including a family gift or inheritance, an insurance claim, or an unexpected work bonus.
Ask the Court for a Hardship Discharge
If your circumstances change for the worse during the terms of your Chapter 13 repayment plan — such as a job loss or disabling injury — you may be able to ask the court to discharge remaining debt earlier under a “hardship discharge.”
For a hardship discharge to be granted, you must show creditors will receive at least the amount of money they would have if you had filed for Chapter 7 bankruptcy, that your change in circumstances was not within your control, that your financial circumstances are unlikely to improve, and that a plan modification is impractical given your financial situation.
Contact a West Palm Beach Bankruptcy Attorney Today
Bankruptcy law is complex, and it is important to raise any questions you have about an upcoming filing or a current bankruptcy case with one of the experienced West Palm Beach bankruptcy lawyers at Kelley, Fulton, Kaplan & Eller. Our firm routinely represents South Florida residents in Chapter 13 bankruptcy cases, and we can speak with you today about options for having your debt discharged in a Chapter 13 bankruptcy case prior to the conclusion of the repayment plan terms. Depending on your specific circumstances, you could have multiple options. Contact us today for more information.
Sources:
law.cornell.edu/uscode/text/11
content.next.westlaw.com/practical-law/document/I210505a9ef0811e28578f7ccc38dcbee/Allowed-Claim?viewType=FullText&transitionType=Default&contextData=(sc.Default)#:~:text=A%20claim%20that%20the%20court,claims%20are%20impaired%20and%20allowed