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What is a Chapter 13 hardship discharge?

Tennesseans who are experiencing financial challenges and have chosen to move forward with a Chapter 13 bankruptcy will undoubtedly understand the basics of the program once they choose it over other alternatives. With a Chapter 13, a plan will be created so the debtor can repay all or some of the debts in a designated time-period of three to five years. For those who have a regular income, this is a sound method to getting a fresh financial start without having to go through a possible liquidation with a Chapter 7.

However, there are certain aspects of the Chapter 13 that might not be fully understood. One is if the debtor is not able to complete the plan. This is when it is possible, if the circumstances warrant it, to have a hardship discharge. Once the plan has been confirmed, issues might come up that will keep the debtor from completing the plan. In such a case, the debtor has the right to ask the court for a hardship discharge.

This discharge will only be available in certain circumstances. If the debtor does not complete the plan because of circumstances out of his or her control and he or she is not at fault, then there can be a hardship discharge. If the creditors have gotten a minimum of what they would have received if the case was filed as a Chapter 7, then there can also be a hardship discharge. Finally, if it is not possible to modify the plan, there can be a hardship discharge. An example of a situation in which there can be a hardship discharge is if there is an injury or illness that stops the person from working and they cannot fund even a plan that has been altered.

For those whose cases are such that they are not able to meet the obligations of a Chapter 13, a hardship discharge is something to think about. At any juncture, financial challenges are difficult. Those who are confronted with issues that make a hardship discharge a possibility should discuss the case with a lawyer who is experienced in Chapter 13 bankruptcy.

Source: uscourts.gov, "Chapter 13 -- Bankruptcy Basics -- The Chapter 13 Hardship Discharge," accessed on July 4, 2017

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Kenneth C. Rannick, P.C.
4416 Brainerd Road
Chattanooga, TN 37411

Phone: 423-954-7180
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Fax: 423-624-0509
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