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A hardship discharge under Chapter 13

Some Ohio residents who are struggling with their financial obligations choose to file for bankruptcy protection under Chapter 13. When they do so, they enter into repayment plans through which they pay off a portion of their debts over a time period that lasts from three to five years. Chapter 13 bankruptcy requires that people have regular sources of income that are sufficient to make the payments under the plan. In some cases, people will experience events that make it impossible for them to continue working, and they may be able to then get hardship discharges.

In a case in neighboring West Virginia, an attorney who had filed under Chapter 13 was granted a hardship discharge by the bankruptcy court over the objections of his creditors. The petition had been filed in 2005 the plan confirmed in 2011. Under the plan, he and his wife were required to make payments of $1,897 per month to repay their creditors.

The man subsequently suffered a stroke that left him unable to work, and he and his wife requested a hardship discharge, but the trustee objected, and the case went to bankruptcy court. The judge found that the man and his wife had met all three prongs of the test contained in the Bankruptcy Code. The man had experienced a condition beyond his control that left him unable to pay. He and his wife had already paid $123,790 under the plan, and they would have had to pay nothing if they had filed for Chapter 7 bankruptcy. Finally, the court found that modifying the plan would not be practical.

Chapter 13 can be an effective way for debtors to obtain a degree of financial relief when they feel overwhelmed by their financial burdens. It also allows them to keep some assets that might otherwise be liquidated in a Chapter 7 proceeding. Not everyone is eligible to file, however, and an attorney can outline the requirements.

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