In Chapter 13, the debtor can receive a discharge only upon completion of the re-payment plan and the personal financial management course. Occasionally, however, circumstances may arise that prevent the debtor from completing the plan. In such situations, the debtor may attempt to modify the plan and complete performance under the plan as modified. See Plan Modification. If the modification of the plan is not practicable, the debtor may ask the court to grant a “hardship discharge.”
Generally, a “hardship discharge” may be granted by the court only if:
- The debtor’s failure to complete plan payments is due to circumstances beyond the debtor’s control and through no fault of the debtor;
- Creditors have received at least as much as they would have received in a chapter 7 liquidation case, i.e., the “best interests” test has been carried out; and
- Modification of the plan is not possible, such as when there has been a natural disaster, a long-term layoff, family injury or illness severe enough that precludes employment sufficient to fund even a modified plan.
The debtor must meet all 3 requirements to receive a discharge. The hardship discharge is, however, limited. It does not apply to secured debts, debts that are non-dischargeable in a Chapter 7 case, or long-term debts on which payments would have been made after the end of the plan period.