In the years after a Chapter 13 Plan is confirmed, circumstances, such as job loss, disability and long term illness, may arise that conspire to keep a debtor from completing the Chapter 13 Plan. When such situations arise, the debtor may request that the court to grant a “hardship discharge.” rather than force the debtor to complete an untenable plan.
Normally a hardship discharge is available only where the following elements are present:
1.) The creditors have received at least as much as they would have received if the debtor had originally filed Chapter 7. Thus, if the debtor filed Chapter 13 because she had 10,000 of non-exempt equity in a home and in her Chapter 13, she paid out less than $10,000 to her unsecured creditors, she would not be eligible for hardship discharge.
2.) The debtor’s failure to submit all the required plan payments is due to circumstances completrely beyond the debtor’s control and through no fault of the debtor; and
3.) Modification of the plan is not possible. Job loss, illness or injury that bars employment sufficient to fund even a modified plan may serve as the basis for a hardship discharge. Opting for hardship discharge is appropriate where modification simply will not work.