Hardship Discharges In Chapter 13 Bankruptcy Cases
When a debtor in South Florida files for Chapter 13 bankruptcy, that debtor enters into a repayment plan agreement that usually lasts for a period of between three and five years. During that lengthy period, the debtor will make monthly payments that go toward repaying debt to creditors based on the value of non-exempt assets. In order to be eligible for a Chapter 13 bankruptcy case, the debtor must show that they are a regular wage earner who is likely to be able to make those regular payments over several years. At the end of the Chapter 13 repayment plan, if the debtor has met the terms of the agreement and has made regular payments, any remaining debts may be discharged.
However, many different issues can arise and changes can take place over the three-to-five-year period of a Chapter 13 bankruptcy case. In some circumstances, the debtor might lose their job or deal with an unexpected expense like a medical emergency that will make it difficult or even impossible to continue making those regular Chapter 13 payments. Under these circumstances, it could be possible to receive what is known as a “hardship discharge.” Our West Palm Beach bankruptcy lawyers can provide you with more information about hardship discharges and how they work.
Modification is Not Practical Under the Circumstances
Under the U.S. Bankruptcy Code, a debtor who enters into a Chapter 13 bankruptcy case is expected to meet the terms of the repayment plan. Yet as we noted above, life circumstances can change, and unexpected events can arise that change the debtor’s ability to make their payments. Depending upon the debtor’s specific circumstances, the first option is usually to modify the repayment plan. There are a number of steps you will need to take if you want to modify the repayment plan and carry through with your bankruptcy case.
In some situations, however, even a modification will not help the debtor. For example, if the debtor has become unable to work due to a disabling injury or condition, a modification to the repayment plan may not make sense. If modification is not practical for the debtor, the debtor ultimately could be eligible to receive a discharge before the repayment plan has been completed. This is known as a “hardship discharge.”
Eligibility for a Hardship Discharge
In order to be eligible for a hardship discharge, the debtor must be able to show that a modification is not practicable under the circumstances. In addition, the debtor must be able to show that they were unable to complete the terms of the Chapter 13 repayment plan due to a change in circumstances that was out of their control, and that the unsecured creditors have already received at least the same amount that they would have if the debtor had filed for Chapter 7 bankruptcy.
Any change in circumstances that qualifies a debtor for a hardship discharge will need to be permanent and substantial.
Contact a West Palm Beach Bankruptcy Lawyer
Do you have questions about a hardship discharge? The West Palm Beach Chapter 13 bankruptcy attorneys at Kelley, Fulton, Kaplan & Eller can help.