Chapter 13 bankruptcy might not be as prevalent as a Chapter 7 bankruptcy, but the process may better serve persons suffering from crushing debt while earning a decent income. Chapter 13 bankruptcy involves establishing a payment plan to deal with certain creditors. Some Louisiana residents might run into troubles following through on the payment plan, leading to a hardship discharge request.
Looking into a hardship discharge
Chapter 13 bankruptcy involves paying down debts within a three to five-year timeframe. Some unsecured debts may be wholly or partially discharged during the process. Collection actions cease, and creditors find the bankruptcy court determines who gets paid.
The debtor might discover a financial situation remains challenging even with the Chapter 13 protections and might request a hardship discharge to address the situation. With a hardship discharge, debts might face elimination before the payment plan concludes.
Hardship discharges and eligibility
The bankruptcy court won’t agree to a hardship discharge unless the debtor meets eligibility requirements. Essentially, the debtor must be in a situation where following through on the payment plan is impossible. Someone unable to work due to a severe medical problem may qualify.
Other criteria will factor into the court’s decision on Chapter 13 bankruptcy hardship discharges. For example, the debtor’s situation must not be due to his or her fault. The court won’t likely look favorably at someone who quit a job for no real reason.
Debtors should expect to compile clear and convincing proof of the inability to complete the payment plan. Without sufficient proof, the court might not approve the discharge.