Hardship Discharge in Chapter 13 Bankruptcy
What is a hardship discharge?
If due to unavoidable circumstances or financial issues the consumer is unable to complete or fulfill his/her obligations to the plan then he/she may ask the court for a hardship discharge
What are the requirements?
- The consumer must be able to present evidence to the court that his/her terrible condition is permanent or is something that cannot be overcome.
- That if it is suggested that he/she modifies the plan instead, he/she would be able to show that that is not going to work either.
What are the similarities and differences between Chapter 7 and Chapter 13 dischargeability?
A Chapter 13 discharge is somewhat broader than a Chapter 7 case. The following are debts dischargeable ONLY in a Chapter 13, but not in chapter 7 (and only if the creditor objects to them successfully):
- From willful and malicious injury to persons and properties (kidnapping, libel, assault, arson, etc.)
- Tax obligations (if the consumer used his/her credit card to pay for tax, to convert the debt from secured to unsecured, the court is not going to discharge it.)
- From property settlements in divorce or separation proceedings.
Chapter 13 "hardship discharge" is similar to Chapter 7 in terms of the types of debts that are exempted from the discharge. If the court grants the consumer a hardship discharge: the unsecured, non-priority debts are going to be let go, but the debts described in Section 523 of the Bankruptcy Code (“Individual Debts”) usually survive the bankruptcy:
- Spousal or child support or alimony
- Governmental units fines and penalties
- Debts for willful and malicious injuries to person or property
- Debts from accidents caused by intoxication and/or drug abuse resulting in personal injury to others
- Debts owed to certain tax-advantaged retirement plans
- Government funded or guaranteed educational loans or benefit