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What is the Chapter 13 'hardship discharge'?

Sometimes, when a person's debts become overwhelming, they may find that filing for bankruptcy is the best way for them to wrest control of their financial problems and move forward with a clean financial slate. While some people in Texas may choose Chapter 7 bankruptcy (liquidation bankruptcy), others may find that Chapter 13 bankruptcy is better for them.

Chapter 13 bankruptcy allows a person to enter into a court-ordered three to five-year repayment plan. Through this plan, they can often prevent foreclosure, as it provides them with a means to catch up on their mortgage payments. A Chapter 13 repayment plan may also lower the amount a person has to pay on their debts monthly, as the repayment period is extended through the terms of the plan.

However, sometimes even the best-laid plans fall through. A person's circumstances may change, making it impossible for them to carry through with the terms of their Chapter 13 repayment plan. When this happens, the person may seek a "hardship discharge." A hardship discharge may be an option if three elements are met. First of all, the person's inability to complete the plan must be due to a situation that is not their fault and is out of their control. Second of all, the person's creditors must have already been paid the amount they would have been paid had the person filed for Chapter 7 bankruptcy. Finally, modifying the Chapter 13 repayment plan must be impossible.

In the end, this post provides only a general overview of the hardship discharge, and cannot serve as the basis for any legal action. If a person finds they cannot follow through with their Chapter 13 repayment plan, they may want to contact an attorney, who can advise them on what steps to take next.

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