In the course of repaying your creditors in Chapter 13 bankruptcy, sometimes your circumstances drastically and permanently change. In fact, a change of circumstances is common in the three to five year repayment period of Chapter 13 bankruptcy. Fortunately, the bankruptcy court may give you a hardship discharge. Here’s what you need to know:
Before you can receive a hardship discharge for your Chapter 13 bankruptcy, you must prove that your changed circumstances are of no fault of your own. For example, you would not be eligible for a hardship discharge if you quit your job because the loss of income is caused by your actions.
Whatever changed circumstances you face must also be permanent in nature. This means that a hardship discharge in Chapter 13bankruptcy may not be available if you lost your job, but you are capable of finding another one. However, a hardship discharge may be available if you’re permanently disabled and you’re unable to work in your profession or work at all.
While the bankruptcy court will sometimes grant a hardship discharge in your Chapter 13 bankruptcy if your circumstances have changed, they may not do so if what you’ve already paid creditors is less than they would get in Chapter 7 bankruptcy. For debtors who have recently filed Chapter 13 bankruptcy and are at the beginning of their repayment period, a hardship discharge may be difficult, but not impossible. Your bankruptcy attorney will need to examine your assets and income to determine if you qualify.
Before receiving a hardship discharge, you must attempt to modify your Chapter 13 bankruptcy repayment plan to fit your new circumstances. However, if a modification is not possible, then receiving a hardship discharge may be an option.
If you see that your circumstances have changed, notify your bankruptcy attorney immediately so that you can work with him/her to either modify your plan or seek a hardship discharge.