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What is a Hardship Discharge?


Chapter 13 bankruptcy is a type of reorganization bankruptcy that is available to individuals, including sole proprietors. In a typical Chapter 13 bankruptcy case, the debtor will file a bankruptcy petition and all required forms and documentation, including a proposed repayment plan. In that repayment plan, the debtor will propose a schedule — typically over three to five years — of making regular, fixed payments. Most debtors will make their payments every month twice per month for the length of the repayment plan. At the end of the repayment plan — after that three to five year period, in other words — the debtor can have remaining eligible debts discharged.

Sometimes, however, a debtor’s circumstances will change significantly while they are making payments on a repayment plan. If a serious change in circumstances occurs in your case, it is critical to find out more about a hardship discharge and whether you could be eligible for one.

Significant Changes in Your Circumstances 

A Chapter 13 repayment plan lasts for a long time, and over a period of three to five years, a debtor’s life can change significantly. The debtor might lose their job and be unable to find another position that pays the same rate they were earning when they entered into the repayment plan. Or, a debtor might experience a significant injury or medical event that makes working impossible, and thus will make it difficult to impossible to continue meeting the terms of the repayment plan.

If a debtor has already spent years making payments toward a discharge in a Chapter 13 case, it can be devastating to think that all of that careful attention to the terms of the bankruptcy case will be wasted since the debtor cannot complete the terms of the plan. It is in these types of situations where a hardship discharge might be possible.

Understanding the Hardship Discharge 

In certain cases, the bankruptcy court might be willing to grant an early discharge to a debtor if they cannot complete the full terms of the repayment plan but have already made significant headway, you could be eligible for a hardship discharge. A hardship discharge requires the following:

  • Proof that a change in circumstances “for which you should not justly be held accountable” occurred, making it so that you cannot complete your Chapter 13 plan;
  • Your unsecured creditors have received at least the amount they would have received in a Chapter 7 case based on the payments you have already made; and
  • Modifying your plan is impractical due to your circumstances.

Even if you are not eligible for a hardship discharge, our lawyers can speak with you about modifying your Chapter 13 repayment plan if you have experienced a change in circumstances that has affected your ability to pay.

Contact Our West Palm Beach Bankruptcy Lawyers Today 

Are you currently in the midst of a Chapter 13 repayment plan but your situation has changed significantly? One of the experienced West Palm Beach bankruptcy attorneys at Kelley, Kaplan & Eller, PLLC can speak with you today about the possibility of a hardship discharge or revising your Chapter 13 repayment plan. Contact us today for more information.



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