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Hardship Discharge

If you're interested in filing personal bankruptcy under Chapter 13 and are concerned about potential job loss or reduction, you are probably wondering what the Chapter 13 hardship discharge is and whether it might be available to you if you need it.

To learn the legal specifics of the Chapter 13 hardship discharge, you can connect with a bankruptcy lawyer in your area for a no-obligation initial consultation. Getting started is easy - simply fill out the free case review form below.

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Conversion to Chapter 7 Bankruptcy Vs. the Hardship Discharge

Chapter 13 bankruptcy works by granting filers a three- to five-year period to catch up on their past-due debts with the help of a monthly repayment plan. In order to remain under the court's protection and receive a Chapter 13 discharge, filers must adhere to the repayment plan month by month. So what happens if you lose your income in the middle of a Chapter 13 case?

  • Conversion to Chapter 7 bankruptcy: In some cases, it may be possible to convert a Chapter 13 case to a Chapter 7 bankruptcy case, which would allow the filer to terminate payments in the repayment plan and instead have eligible debts discharged. In order to convert a bankruptcy case form Chapter 13 to Chapter 7, filers must pay a conversion fee, but the process is otherwise fairly simple.
  • Hardship discharge: In other cases, conversion to Chapter 7 bankruptcy may not be possible, and the filer may have to consider a hardship discharge. In order to be eligible for the Chapter 13 hardship discharge, a filer must meet all of the following criteria:
  1. The circumstances that made the filer unable to continue making payments must be beyond the filer's control;
  2. Creditors must have gotten at least as much money as they would have in a Chapter 7 bankruptcy filing and liquidation; and
  3. A modification to a Chapter 7 case is not possible.

Student Loan Hardship Discharges in Bankruptcy

In the broader bankruptcy context, the phrase "hardship discharge" might also refer to student loans, which, under normal circumstances, cannot be discharged in bankruptcy cases. In order to have student loans discharged in bankruptcy, a filer must prove that repaying those loans would cause "undue hardship," which usually means:

  • Repaying the student loan would prevent the filer from maintaining a certain minimum standard of living;
  • The filer’s financial circumstances are not likely to change or improve at any time in the near future; and
  • The bankruptcy judge approves the application for a hardship discharge, based on the above two criteria.

Learn More about Hardship Discharges from a Bankruptcy Lawyer

If you're interested in knowing whether you may be eligible for a hardship discharge in your bankruptcy case, take advantage of this opportunity to connect with a Chapter 7 bankruptcy lawyer for a free consultation. Simply fill out the quick case review form on this page to get started now.

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