Chapter 13 bankruptcy has numerous benefits, including protection from debt collection efforts by your lenders and creditors. However, you must be ready to commit to a repayment plan over about 3 to 5 years.

Filing for Chapter 13 allows you to keep your non-exempt properties as long as you pay your creditors a portion of the owed amount. Unfortunately, sometimes life throws unexpected challenges your way that make it difficult to keep up with your payments under the court-approved repayment plan.

When that happens to you, a financial hardship discharge could offer you the relief you need to keep your creditors at bay while fixing your financial situation. Ensure you consult with a seasoned bankruptcy attorney for legal guidance and representation as you seek financial hardship discharge.

Hardship Discharge at a Glance

Under normal circumstances, the court would expect you to complete the repayment plan within not more than five years to secure a discharge of your burdening debts. When you fail to complete this repayment plan due to circumstances that are within your control (preventable reasons), you will not receive a discharge of your overwhelming debts, and the court may dismiss your bankruptcy case.

However, what happens when you fail to complete the court-approved repayment plan within the set 3-5 year period? If you are in this situation, all hope is not lost. With the legal assistance of your attorney, you can seek hardship discharge even if you have not completed your repayment plan.

A hardship discharge is a special debt relief option available to Chapter 13 bankruptcy filers with difficulties completing their proposed repayment plan due to circumstances or reasons beyond their control. While securing a hardship discharge can be a lifeline if you have overwhelming debts and your creditors are on your neck, the court only grants this debt relief option under strict conditions.

Also, hardship discharge will not free you from certain debts, including student loans, alimony, child support, debts related to criminal restitution, and drunk driving cases.

Eligibility Criteria for Chapter 13 Hardship Discharge

Not every debtor who struggles to keep up with a Chapter 13 repayment plan is eligible for hardship discharge. For the bankruptcy court judge to grant you this type of relief, your attorney must prove certain facts, including the following:

You Faced Circumstances That Are Beyond Your Control

First, you must prove to the court that you are not to blame for the issues or circumstances that prevented you from completing your repayment plan. Bankruptcy courts could accept this argument as long as your attorney can prove that your inability to keep up with the payments was due to factors or circumstances beyond your control.

For example, you can sustain an injury that could leave you disfigured and permanently unable to work and earn income to clear your debt. The bankruptcy court judge has the discretion on whether to grant you a discharge based on the specific circumstances or reasons your attorney will present as reasons for failing to keep up with or complete your Chapter 13 repayment plan.

You Have Met the Required Payments Threshold

You could qualify for hardship discharge if your attorney can prove that the creditors and lenders have received at least as much money as they would have received if you had filed for Chapter 7 bankruptcy. Every attempt to make a payment demonstrates good faith in your Chapter 13 repayment plan.

If your attorney cannot prove that your lenders have met the required payment threshold, the court could convert your case to a Chapter 7. Also known as liquidation bankruptcy, Chapter 7 allows your creditors to sell your nonexempt property to pay your debts.

Modification of the Plan is not Feasible

To qualify for a hardship discharge, your attorney must prove that modifying your repayment plan will not solve your financial problem due to the nature of the current circumstances. If the court finds that your financial issue is temporary, it could extend your repayment plan or reduce each payment to ensure your creditors receive their payment.

Meeting these requirements does not guarantee that the court will grant a hardship discharge, but they are the cornerstones of a successful hardship discharge petition. Whether you will qualify for a hardship discharge will depend on the facts of your unique case and your

The aggressiveness of your attorney can mean the difference between securing a successful outcome and case dismissal.

Examples of Circumstances or Situations That Could Qualify You for a Hardship Discharge

Common examples of hardships that will qualify you for a hardship discharge include the following:

  1. Medical Hardships

In most cases, the strongest ground for securing a hardship discharge is a medical hardship. If your attorney can prove to the bankruptcy court that you sustained a severe injury or illness that required expensive treatments or prevented you from working to earn income, you could qualify for a hardship discharge.

The court understands that a medical emergency could lead to increased expenses and income reduction, and with adequate evidence, this ground qualifies you for hardship discharge.

  1. Employment-Related Hardships

An involuntary job loss is another hardship that could make it challenging to complete your Chapter 13 repayment plan. If your employer decides to close down his/her company due to reasons beyond their control, your ability to keep up with your repayment plan could be difficult, especially if you do not have another source of income.

  1. Family Emergencies

A family emergency that requires substantial financial resources could also convince the bankruptcy court to award you a hardship discharge. For example, caring for a disabled family member or the death and funeral of a loved one are examples of family-related emergencies that could make it challenging to complete your repayment plan.

Limitations of Securing a Hardship Discharge

Unfortunately, like a Chapter 13 bankruptcy, securing a hardship discharge will not relieve you from all debts. If you qualify for a hardship discharge, your obligation to pay the following debts will not change:

  • Certain secured debts
  • Priority debts
  • Student loans
  • Debts not listed in your bankruptcy filing
  • Most taxes
  • Liability for a personal injury case
  • Domestic support obligations, including child support and alimony

It is worth noting that this is not an exhaustive list of debts that a hardship discharge will not wipe out. Understanding the exemptions of this debt relief option is crucial before you submit your petition. That is where the services of an attorney become crucial.

A seasoned bankruptcy attorney can help you determine whether you can qualify for this debt relief option after financial hardships that make it challenging to complete your repayment plan. A seasoned bankruptcy attorney can help you every step of the way to find a viable solution that can help lessen the financial hardship caused by unforeseen circumstances.

How to Apply for a Hardship Discharge

To secure a hardship discharge, your attorney has to prepare and file a petition with the bankruptcy court that is handling your Chapter 13 bankruptcy case. In addition to being a multi-step process, you need adequate evidence to convince the court that you are an excellent candidate for a hardship discharge. Here are examples of evidence that you and your attorney need to compile before filing this petition:

  • Your unemployment documentation, employment termination letter, or any evidence that shows unsuccessful job applications
  • Medical records that show your sickness or disfigurement impacting your physical ability to work and earn income
  • Financial statements that show your current expenses and income compared to the original Chapter 13 repayment plan
  • Any other viable evidence that can show the court that the cause of your financial hardship is beyond your control

Once your attorney prepares and gathers all the vital evidence, he/she will file your petition with the bankruptcy court. Then, the court will schedule a hearing where your attorney will present your case to convince the court to award you a hardship discharge.

It is worth noting that after filing the petition, your creditors will receive a notice of the filing and may likely object, especially if they believe your repayment plan adjustment is possible or that your financial hardship is temporary.

During this hearing, the bankruptcy court judge will evaluate the available evidence to determine whether your unique financial situation meets the required threshold and whether awarding you a hardship discharge will serve the interest of justice.

Key Benefits of Securing a Hardship Discharge

A hardship discharge can offer the much-needed relief if the court finds that you have genuine financial hardships that could make it difficult to complete your Chapter 13 repayment plan. The most obvious advantage is the elimination of your remaining debt responsibilities that the discharge covers.

That allows you to move on with your life without the financial burden of making payments that you cannot genuinely afford. Unlike a debt discharge under Chapter 13 bankruptcy, which leaves you with all your debts intact, a hardship discharge will eliminate all your qualifying debts permanently. That means your creditors and lenders cannot engage in debt collection efforts against you, including wage garnishments.

A hardship discharge also offers you faster relief than keeping up with an unworkable repayment plan. Instead of struggling for several years to keep up with a repayment plan you cannot sustain, a hardship discharge will allow you to secure a closure and start fixing your financial status without worrying about the harassment and debt collection efforts by your lenders.

Other Alternatives You Can Consider if You Are Ineligible for a Hardship Discharge

If you are not an excellent candidate for a hardship discharge, your attorney can help explore other legal options for securing debt relief. Depending on your unique circumstances, your criminal defense attorney could recommend any of the following debt relief options:

  1. Plan Modification

Seeking a modification of the Chapter 13 repayment plan is one of the most common alternatives to a hardship discharge. Securing a plan modification could be a viable option if your hardship is temporary or the court agrees to reduce the payments you need to make to the original repayment plan.

A plan modification allows you to complete your repayment plan while accommodating the changed financial circumstances.

  1. Case Dismissal

Securing a case dismissal could be a brilliant idea if you want immediate relief from your payment obligations and do not mind losing your Chapter 13 legal protections. While it will end your bankruptcy case, it will leave all your debts intact, meaning your creditors can resume their collection efforts, including lawsuits.

  1. Conversion to a Chapter 7 Bankruptcy

If you qualify for Chapter 7 bankruptcy, it can offer you a greater degree of debt relief than you desire. Chapter 7 can discharge you from more outstanding debts than you would expect when you file a petition for a hardship discharge, and also provide you with a faster solution for fixing your financial situation.

Your attorney will evaluate your case to help determine the ideal debt relief alternative that gives you a fresh start while struggling with overwhelming debts.

Steps for Appealing an Unsuccessful Hardship Discharge Petition

If the bankruptcy court denies your hardship discharge petition, you can file an appeal to that decision with your attorney's legal guidance to secure a favorable outcome. Below are the steps you need to follow when appealing your petition for a hardship discharge:

  1. Review the Court Response or Denial Reason

Before you think about appealing the bankruptcy court decision on your hardship discharge petition, you should first review the judge's response to determine the cause of denial.

  1. File a New Motion for Reconsideration

Once you and your attorney understand the primary reasons for the unsuccessful petition, he/she can file a motion for reconsideration and present evidence that can increase your odds of securing a favorable outcome.

  1. Seek Appeal Court Review

With the legal assistance of your attorney, you can also file an appeal with a higher court or appellate court. If the appellate court rules in your favor, you will enjoy all the benefits that this debt relief option can offer.

How a Skilled Attorney Can Help When Seeking a Hardship Discharge From Your Overwhelming Debts

Generally speaking, navigating hardship discharge procedures and requirements requires keen attention to detail and adherence to necessary court procedures. That is where the services of a seasoned bankruptcy attorney become crucial.

Having a skilled and reputable attorney in your corner is key to securing a favorable outcome when seeking a hardship discharge. If you are experiencing financial hardships that are beyond your control and cannot manage to keep up with your Chapter 13 repayment plan, consult a seasoned attorney immediately.

The attorney you will hire will evaluate your unique financial circumstances to determine whether you qualify for a hardship discharge and assist you in understanding how this debt relief option compares to other options, including plan modification.

Your bankruptcy attorney will also ensure your hardship discharge petition is accurate and has viable evidence that can increase your odds of qualifying for a desirable outcome. Professional legal representation by a skilled attorney also becomes vital when your creditors object to your request for a hardship discharge or when complicated legal issues regarding qualification requirements arise.

Frequently Asked Questions About Hardship Discharges

It is not uncommon for people to ask questions before deciding on whether to file a hardship discharge petition after experiencing financial issues that make it difficult to continue with or complete a Chapter 13 repayment plan. Common frequently asked questions by many debtors include (but are not limited to) the following:

  1. Can a Hardship Discharge Impact My Credit Score?

Yes, like any other form of bankruptcy discharge, securing a hardship discharge will negatively impact your credit score, but it marks a resolution of your case.

  1. What Will Happen if I Expect Income Changes in the Future?

A hardship discharge is ideal for individuals experiencing permanent financial hardships that prevent them from making their Chapter 13 payments. Therefore, when your income improves, the bankruptcy court may modify your repayment plan to allow you to continue making your payments to your lenders.

  1. Will Chapter 7 Bankruptcy Filers Be Eligible for a Hardship Discharge?

No, hardship discharge will not apply to you after filing for Chapter 7 bankruptcy. You are eligible for a hardship discharge only if you are under a Chapter 13 bankruptcy repayment plan and keeping up with your payments is difficult due to unforeseen financial issues.

Find a Bankruptcy Attorney Near Me

A Chapter 13 hardship discharge could provide you with the much-needed debt relief if you are struggling to stay afloat financially due to unforeseen circumstances or emergencies. However, achieving this unique debt discharge is not a walk in the park, and the success of your petition hinges on the experience and dedication of your attorney.

If you want to learn more about this debt relief option or you need legal assistance filing your petition, our credible attorneys at the Los Angeles Bankruptcy Attorney are here to help. Call us at 424-285-5525 to schedule your initial consultation as soon as you can and begin your journey to a fresh financial start.