In Orange County, Riverside and throughout the Country many Debtors are required to file a Chapter 13 Bankruptcy. Debtors must partake in the grueling 3-5 year repayment plan in a Chapter 13 if they do not qualify for a Chapter 7.
In a Chapter 13, Debtors are put on a very strict budget. Although there are solutions for emergency expenses and financial changes during a Chapter 13, the limits put on these solutions by court processes and procedures usually leave the Debtor with little to no recourse.
Many times, I see Chapter 13 cases get dismissed because of the limits put on Debtors and their attorneys by the court processes and procedures. However, there is still a glimmer of hope if all else fails. In some cases, if a Debtor cannot complete the Chapter 13, they can request a hardship discharge from the bankruptcy court.
What are the requirements of a Hardship Discharge?
A bankruptcy court may grant your request for a hardship discharge if these three requirements are met:
1) You fail to complete your Chapter 13 payments due to circumstances which you should not justly be held accountable. In other words, something so bad happened in which you can no longer make the plan payment. It must not be your fault, there is nothing you can do to change it and it is not temporary.
2) The value of property distributed under the Chapter 13 plan is not less than the amount that would have been paid to the creditors if property was liquidated under Chapter 7. Basically, this means that the amount you have paid during the course of your Chapter 13 plan is more than what the creditors would have received if your property was liquidated in a Chapter 7 when you originally filed your case. If all of your property was exempted, or if you did not have any equity or assets when you filed your case, you will most likely pass this prong of the requirements.
3) Modification off your Chapter 13 plan is not practicable. This means, that the situation is pretty much so dire modifying or suspending your Chapter 13 payments will not help you.
Are all debts dischargeable under the Hardship discharge?
No. The hardship discharge is more limited than the dischargeable debt provided for in Chapter 13 and Chapter 7 cases. There are many factors to consider before filing for a hardship discharge. This is something all debtors should consult with their bankruptcy attorneys.
Below are some debts that are not dischargeable:
- priority debts, including taxes, child support, and alimony
- secured debts and secured debt arrears
- debts you didn’t list in your bankruptcy papers
- student loans
- fines or restitution imposed in a criminal-type proceeding, including DUIs
- HOA dues and assessments
- debts obtained through fraud
- 401k Loans, retirement loans and other loans of this nature