If your financial circumstances change so that you cannot complete your Chapter 13 repayment plan, you can ask the court for a Chapter 13 hardship discharge. If the court grants your hardship discharge request, your unsecured, nonpriority dischargeable debts will be discharged, even though you did not finish making all payments under the plan. (To learn more about Chapter 13 bankruptcy and repayment plans, see Chapter 13 Bankruptcy: An Overview.)
In order to qualify for a hardship discharge, you must meet three criteria. Keep in mind, though, that even if the court grants the discharge, some types of debts won't be discharged. Here are the details.
Circumstances Supporting a Hardship Discharge
In order to qualify for a Chapter 13 hardship discharge, you must meet all three of the following conditions.
- You cannot complete the repayment plan due to circumstances "for which you should not justly be held accountable." This usually means more than just a temporary job loss or temporarty physical disability or medical issue.
- Because of payments you already made under the plan, your unsecured creditors have received at least what they would have received had you filed for Chapter 7 bankruptcy.
- It is not practical to modify your repayment plan.
Debts That Will Not Be Discharged
Even if the court grants you a hardship discharge, the following debts will not be discharged:
- priority debts
- secured debts
- arrears on secured debts
- debts not listed in your petition
- student loans
- most tax debts
- child support and alimony
- fines or restitution imposed in a criminal-type proceeding
- debts for death or personal injury resulting from driving under the influence
- debts not discharged in a previous bankruptcy that was dismissed due to fraud, and
- debts owed to a pension, profit-sharing, or similar plan.
Debts That Won't Be Discharged if a Creditor Objects
Some debts won't be discharged if a creditor objects. If the creditor doesn't object, however, they will be discharged. These types of debts are:
- debts incurred through fraud
- debts incurred through willful and malicious injury, and
- debts incurred through embezzlement, larceny, or breach of fiduciary duty.