What is a hardship discharge?

Posted by Angelique CooperJun 13, 20190 Comments

If you decide to file bankruptcy in Alabama, you first have to decide which type to file. If you have enough income, then you can file Chapter 13, which is a repayment plan. You create a plan to pay back your creditors. You will not always have to pay the full amount, but you will pay at least some of the debt you owe over the course of three to five years. At the end of your plan period, the bankruptcy court will discharge your case. However, if you face issues during the process and cannot payback according to the plan, you may qualify for a hardship discharge.

According to the U.S. Courts, a hardship discharge is when you cannot complete your plan for some reason and the court steps in to discharge your case anyway. This is a very limited option. The court must find that you have tried to complete the plan but that through no fault of your own and through circumstances which you cannot control that you cannot complete the plan payments. It must also see that a modification to the plan will not work and that creditors have received as much payment as they would have if you filed Chapter 7 instead.

Generally, a hardship discharge occurs when you face an illness or injury that affects your earnings and makes it impossible for you to financially afford the plan payments. It is completely up to the court whether to grant this type of discharge as the court takes a strict stance on completing the plan. However, it is your right to ask for relief in this way.

If granted, your discharge will complete your bankruptcy just like normal and you will be free from the debts covered under your case. This information if for education only. It is not legal advice.