Getting a Chapter 13 Discharge without Completing Your Payment Plan: What You Need to Know

Chapter 13 Bankruptcy Discharge and Non Completion of a Payment Plan

When you file for Chapter 13 bankruptcy you’ll be given a payment arrangement. You are responsible for making payments for three to five years and at the end of that time, your remaining debts can be discharged. It’s possible to make changes to your Chapter 13 repayment plan if certain things in your life change, but for the most part, you must complete the plan in order to have a successful Chapter 13 bankruptcy.

But what happens if financial hardship causes you to not be able to make payments? Will you lose out on the benefits of filing for bankruptcy?

It depends.

Hardship Discharge of Debts in Chapter 13

It is possible to get a Chapter 13 discharge without completing the planned payments, but it’s going to take effort on your part and it is something that is best done with the guidance of an experienced bankruptcy attorney.

According to the Bankruptcy Code, Chapter 13 hardship discharge is available. If you can show that you cannot complete your repayment due to circumstances for which you are not accountable, the court can discharge your debts.

Examples of circumstances that might result in discharge include illness, job loss, and or aging and experiencing a change in income.

There are specific conditions that must be met in order to qualify for Chapter 13 discharge before your repayment plan is complete. These include:

Paying unsecured creditors at least the amount they would have received had you originally filed for Chapter 7
Inability to modify the existing Chapter 13 plan
Proving that your inability to make payments is out of your control

To qualify for an early Chapter 13 discharge, you’ll need to file a motion for a hardship discharge and show the court that each of these three conditions has been met.

Keep in mind, some debts that would have been dischargeable had you completed your Chapter 13 repayment will not be cleared if you request a hardship discharge.

You can see more about specific types of debts and how they are handled in a Chapter 13 hardship discharge here.

Should You Convert Chapter 13 to Chapter 7?

For some people experiencing hardship with their Chapter 13 bankruptcy plans, the better option is to convert their existing plan to Chapter 7. The case remains the same and you won’t need to pay a new filing fee.

Though conversion can be helpful, there are several reasons why you might prefer to request a Chapter 13 hardship discharge, such as:

Your Chapter 7 discharge will take months and you’ll be required to participate in another meeting of creditors during the process
You’ll be assigned a Chapter 7 trustee and you’ll lose control of your assets
Filing for Chapter 7 means you won’t be eligible for bankruptcy relief in the future as quickly as you would if you’d remained in a Chapter 13 plan

If you’re in the midst of a Chapter 13 repayment plan and for one reason or another you can no longer meet your repayment obligations, we can help. Contact the Law Office of Robert M. Geller at (813) 254-5696 for more information or to schedule a consultation.