When you file a petition for Chapter 13 bankruptcy protection, you present a payment plan that, once approved, obligates you to make monthly payments to the bankruptcy trustee, who will then pay your creditors with the money. In order to obtain a discharge of your remaining unsecured debts, or have them wiped out at the end of your plan, you must make each and every payment. If you can't complete your Chapter 13 repayment plan, you can have your bankruptcy attorney file a motion with the bankruptcy court asking for a hardship discharge. A hardship discharge is a discharge that the court grants before you complete all the required payments.
Requirements for Chapter 13 Hardship Discharge
In order to receive a hardship discharge, three conditions must be met, which include:
A modification isn't realistic.
Typically, a decrease in income in chapter 13 bankruptcy is met with a modification to the monthly payment amount to the bankruptcy trustee, however, to obtain a hardship discharge you will have to prove the inability to pay back you plan under any reasonable circumstances.
Unsecured creditors have received the same amount of money as a Chapter7 Bankruptcy.
The amount of money your unsecured creditors receive in a Chapter 7 bankruptcy is related to the amount of nonexempt property that you own. This is the amount that you must show the court has already been paid to your unsecured creditors.
The failure to complete the repayment plan was due to extenuating circumstances beyond your control.
In showing the courts that you have experienced circumstances that justify a hardship discharge it must be a reason that was no fault of your own and that is both a serious and permanent reason that prevents you from making your Chapter 13 payments such as a permanent medical condition or disability that arose after your Chapter 13 confirmation.
If you are having trouble making your monthly Chapter 13 payments to the bankruptcy trustee due to reasons outside of your control, it is crucial you stay in touch with both the trustee and your Sacramento bankruptcy lawyer to keep them abreast of your situation. Chapter 13 repayment periods last anywhere from three to five years and so a lot can happen and there are contingencies available for life events such as payment modifications or conversion of your Chapter 13 to a Chapter 7 bankruptcy, but you will only have these options if the parties in your case are kept abreast of your situation. If you simply stop making your Chapter 13 payments, your entire bankruptcy case could be dismissed, leaving you back where you originally started and without the debt relief you needed.