It can prove to be a truly glorious day when an individual who has filed for Chapter 13 bankruptcy makes the final payment under their repayment plan. That's because they are now only a few relatively simple steps away from securing a discharge, meaning released from all of the debts covered by the plan and free from the watchful eye of creditors.
Indeed, the Chapter 13 discharge will be granted provided that the individual is able to demonstrate the following to the bankruptcy court after making the final payment: satisfaction of all domestic support obligations, no prior discharge within a certain timeframe (4 years prior for Chapter 7, 2 for Chapter 13), and completion of an approved financial management course.
As liberating as securing a Chapter 13 discharge can be, questions naturally arise as to what happens if circumstances arise that prevent a person from being able complete all of the required payments.
For instance, what if the individual who filed for Chapter 13 is diagnosed with a serious illness or suffers a debilitating injury that prevents them from working in a position that would fund even a modified repayment plan?
In recognition of these circumstances, the bankruptcy code enables individuals to request what is known as a "hardship discharge" from the bankruptcy court.
Such a break is typically only available if the following conditions are met:
- The inability to complete the repayment plan is due to circumstances beyond the control of the individual and through no fault of their own.
- The individual's creditors have secured at least as much as they would have in a Chapter 7 bankruptcy.
- Modification of the repayment plan is impossible.
It's important to note that the Chapter 13 hardship discharge is more limited in scope, such that it does not apply to any debts otherwise non-dischargeable in a Chapter 7 bankruptcy.
If you would like to learn more about this issue or the fresh start offered by Chapter 13, consider speaking with a skilled legal professional.