What if I am making payments in a Chapter 13 Bankruptcy and an unusal circumstance occurs that makes me unable to make payments any longer?

There may be times when a debtor is making payments through a Chapter 13 Plan, then all of a sudden he or she is hit with a particular set of events that makes it almost impossible to complete their Chapter 13 repayment plan. The Bankruptcy Code provides for the filing of a motion seeking a hardship discharge in these type of circumstances. Of course the ability to receive a hardship discharge is not without limitation. The debtor must show the following:

1) The failure to complete your Chapter 13 plan payments are due to circumstances "for which you should not be justly held accountable" (These circumstances do not need to be catastrophic or the "truly worst of the awfuls", but it is necessary to present evidence more than simply unsubstantiated and conclusory statements of the debtor's inability to complete the Chapter 13 Plan. A severe deterioration in the debtor's financial circumstances may possibly be sufficient, whereas a temporary loss of a job would not be);

2) That unsecured creditors have received at least as much as they would have received if the debtor had filed a Chapter 7 Bankruptcy (Oftentimes, a debtor might have to file a Chapter 13 Bankruptcy because they have property that they are unable to exempt. This would mean that it would be necessary to pay unsecured creditors at least the value of the nonexemt property because had the debtor filed a Chapter 7 Bankruptcy this property would have been liquidated and the unsecured crditors would have received at least the value of this property. This being the case, a hardship discharge would more likely be granted near the completion of the Chapter 13 Bankruptcy); and

3) Any modification of the Chapter 13 Plan simply would not be practticable.

A Chapter 13 Bankruptcy is generally anywhere from three to five years. In order to receive a hardship discharge, it is first necessary that the Chapter 13 Plan has been confirmed. The type of discharge that the debtor receives is similar to that received in a Chapter 7 Bankruptcy, whereas the discharge that is received in a Chapter 13 Bankruptcy is somewhat broader. If a hardship discharge is granted only unsecured and nonpriority debts are wiped out. The debtor still remains legally liable for any secured or priority debts. One other point worth noting is that upon the completion of a Chapter 13 Bankruptcy the debtor is required to certify that all domestic support obligations, such as child support, spousal support or alimony have been made. This is not a requirement to receive a hardship discharge. Otherwords, no certification regarding the payment of domestic support obligations is necessary.

So if you find yourself facing similar circumstances or you have any unanswered questions regarding bankruptcy, then call Pittsburgh Bankruptcy Attorney Rodney Shepherd at 412 471-9670 or fill out our content information form and we will immediately contact you to schedule a free consultation.