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What are Chapter 13 discharge and Chapter 13 hardship discharge?

After an Appleton, Wisconsin, resident files for bankruptcy under Chapter 13, that person may obtain a discharge for the bankruptcy court before moving ahead with a clean slate. Therefore, understanding how the Chapter 13 discharge process works is very important. According to federal bankruptcy law, a Chapter 13 discharge can be either a normal discharge or may be due to hardships faced by the debtor. In both cases, a debtor is relieved of debt by the court, enabling that debtor to make a fresh financial start.

According to the law, a person can receive a discharge after a successful Chapter 13 bankruptcy filing when all debts are cleared. However, there are certain stipulations.

  • The debtor must show that all domestic support obligations until the time of discharge were met
  • The debtor must not have received a discharge for a Chapter 13 filing in the past two years or for a Chapter 7, Chapter 11, or Chapter 12 filing in the past four years
  • The debtor must have completed a financial management course approved by authorities

Once a debtor has established these points, the court will award a discharge only after ascertaining that there are no pending proceedings, which might lead to limitations on the debtor's homestead exemptions. After a bankruptcy court has awarded a debtor a discharge, creditors cannot take action, legal or otherwise, against that debtor. However, there may remain certain debts that are not wiped out by a Chapter 13 bankruptcy filing. It is important to remember that a debtor is responsible for those debts, even after obtaining a Chapter 13 discharge.

While a normal discharge is awarded after a debtor successfully fulfills the requirements of a repayment plan, there may be instances in which a debtor is unable to make the necessary repayments due to some genuine and unavoidable reason. In such a situation, a debtor may request the court to grant a Chapter 13 hardship discharge. A hardship discharge is only available if:

  • The debtor's inability to fulfill the requirements of the repayment plan is beyond his or her scope of influence
  • The creditors have so far received what they could obtain from a Chapter 7 liquidation bankruptcy
  • A modification to the repayment plan is not possible

However, a hardship discharge is difficult to obtain and does not apply to debts that cannot be eliminated by a standard Chapter 7 liquidation bankruptcy filing.

Source: United States Courts, "Individual Debt Adjustment," accessed Dec. 23, 2014

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