Chapter 13 hardship discharge · Beverly Hills
Chapter 13 Hardship Discharge
A Chapter 13 hardship discharge lets the court wipe out most unsecured debt even though you did not finish your plan. You must show that something outside your control stopped you, that creditors got at least Chapter 7 value, and that changing the plan will not work. Call (310) 362-9071 to see if you qualify.
- The rule is in 11 U.S.C. 1328(b)
- All three requirements must be met
- It wipes out less than a regular Chapter 13 discharge
At a glance
The three requirements
To get a hardship discharge in Chapter 13 bankruptcy, you must meet all three tests in 11 U.S.C. 1328(b). The court decides after notice and a hearing.
- You cannot finish because of circumstances you "should not justly be held accountable" for. The problem must be outside your control. A choice to spend money elsewhere does not count.
- Unsecured creditors have already received at least what they would have received in Chapter 7. This is the liquidation test. If you had little non-exempt property, this is often met.
- Modifying the plan is "not practicable." If a plan modification could fix the problem, the court will expect you to try that first.
Examples that may qualify
Courts look at the facts of each case. Situations that may qualify include:
- A serious illness or injury that ends your ability to work
- A permanent disability
- The death of a spouse or family member whose income paid the plan
- A long-term job loss in a field where work is not coming back, when no lower plan would work
A short-term setback usually does not qualify. If you are likely to recover, the court will expect you to modify the plan or take a payment break instead. A hardship discharge is for problems that make finishing the plan unrealistic.
What a hardship discharge does and does not cover
A hardship discharge wipes out most unsecured debts, such as credit cards, medical bills and personal loans. But it is narrower than the full discharge you get when you finish a plan.
- Debts listed in 11 U.S.C. 523(a) survive. That includes support, most student loans, certain taxes and debts from fraud. See debts that are not discharged.
- Long-term debts that last past the plan survive. A mortgage that you were paying over its normal term is one example.
- Secured debts keep their liens. If you want to keep a house or car, you still need to pay that lender.
You also need to complete the debtor education course before the discharge. See credit counseling and debtor education courses.
Hardship discharge compared to other options
| Option | When it fits | Main trade-off |
|---|---|---|
| Plan modification | Your income dropped but you can still pay something | You stay in the plan longer or pay less to unsecured creditors |
| Hardship discharge | A lasting problem outside your control means no plan will work | Narrower discharge, and you must meet all three tests |
| Convert to Chapter 7 | You qualify for Chapter 7 and have little non-exempt property | A Chapter 7 trustee reviews your assets again; see converting to Chapter 7 |
| Dismissal | You want out and have another plan for your debts | No discharge; debts and collection come back |
Converting to Chapter 7 is often simpler than a hardship discharge if you pass the means test. But if you have equity that a Chapter 7 trustee could sell, a hardship discharge may protect it. We compare both for you. Read more about what dismissal means before choosing that route.
What to watch for
- Waiting until the case is dismissed. You must ask for a hardship discharge while the case is open.
- Weak proof. Bring medical records, a death certificate or job records to show the cause.
- Skipping the modification question. Be ready to explain why a lower payment would not work.
- Forgetting the course. No debtor education certificate, no discharge.
What it costs
- Chapter 7: flat attorney fee from $1,200, plus the $338 court filing fee
- Chapter 13: attorney fee quoted in writing, and part of it can be paid through the plan
- Payment plans are available, and the first consultation is free
More on Chapter 13 bankruptcy
- Chapter 13 bankruptcy in Beverly Hills
- Chapter 13 Eligibility and Debt Limits
- How a Chapter 13 Plan Payment Is Calculated
- Car Loan Cramdown and the 910-Day Rule
- Changing a Chapter 13 Plan After Filing
- Why Chapter 13 Cases Get Dismissed and How to Avoid It
- Chapter 13 Hardship Discharge
- The Co-Debtor Stay: Protecting a Co-Signer
- Mortgage arrears cure plan
- Second mortgage lien stripping in Chapter 13
- Converting Chapter 13 to Chapter 7
Hardship discharge questions
What is a Chapter 13 hardship discharge?
A Chapter 13 hardship discharge is a discharge the court can grant when you cannot finish your plan because of circumstances outside your control. It wipes out most unsecured debts that remain.
Does losing my job qualify for a hardship discharge?
Losing your job may qualify for a hardship discharge if it is long-term and no modified plan would work. A short gap in work usually leads to a modification instead.
Is a hardship discharge the same as a full discharge?
No, a hardship discharge is not the same as a full discharge. It does not cover debts listed in 523(a) or long-term debts that run past the plan.
Should I convert to Chapter 7 instead?
Converting to Chapter 7 instead may be simpler if you qualify and have no property at risk. If a Chapter 7 trustee could sell something you own, the hardship discharge may be better for you.
Free consultation
Cannot finish your plan
Call (310) 362-9071 or send the form. Tell us what happened and we will review whether a hardship discharge fits.
Law Offices of John Asuncion9454 Wilshire Blvd., Penthouse Floor
Beverly Hills, CA 90212
(310) 362-9071
Monday to Friday, 9 a.m. to 6 p.m.