Despite your best efforts, you may fail to meet your obligations in Chapter 13 bankruptcy. If this happens, you may be able to get a hardship discharge, which is simply a discharge you get before meeting all the original requirements of your bankruptcy case. However, a hardship discharge isn't a walk in the park; you have to meet all these three conditions:
Modifying Your Plan Isn't Feasible
The first thing the court expects you to do when your financial situation takes a turn for the worse is to petition for a plan modification. The modification can take different angles. For example, you may be able to suspend your payments temporarily, extend the life of your plan, or even refinance an existing secured debt. This is the ideal situation for the creditors since they don't lose their money.
The court will reject your petition or a hardship discharge if there is even a small chance that you can modify your plan. You can't lose a job today and get a hardship discharge the next day. Can you get another job, start a business, or become a consultant? If any of those is possible, then you won't get a hardship discharge. You need to prove that your financial quagmire is permanent before getting a discharge. For example, you have a high chance of succeeding if you have a medical condition that makes it difficult for you to hold down a job.
Your Change in Finances Is Beyond Your Control
This condition is necessary to prevent people from using the hardship allowance as a way of shirking their financial responsibilities. A person shouldn't be able to do something bad at work, get fired, and use the hardship discharge as a loophole to get out of the debt.
For this reason, the court will need proof that you couldn't help or avoid the situation that has caused your financial difficulty. For example, you may not get the hardship discharge if you got fired for constantly turning up late and drunk for work. However, you may get the discharge if your employer went out of business because the economy tanked and they weren't prepared for it.
Your Debtors Have Received Their Minimum Amounts Due To Them
Chapter 13 Bankruptcy is designed in a way that the creditors eventually receive, at the very least, the amount of money they would have received via a Chapter 7 discharge. One reason for this provision is to prevent debtors from using Chapter 13 instead of 7 to reduce their financial obligations to their creditors. Therefore, for you to get the discharge, you must have repaid your creditors this minimum amount.
You must prove all these conditions for you to get the hardship discharge, which isn't easy. Make it a bit easier by consulting a bankruptcy lawyer experienced in these issues.Share