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The Chapter 13 hardship discharge

Much of this blog is dedicated to discussing the advantages of bankruptcy. Those facing significant financial challenges may be able to find real debt relief by seeking Chapter 7 or Chapter 13 bankruptcy, but the process is not always guaranteed. Even if a petition is granted, following through on it can prove tough, which can leave some Wisconsin residents even more concerned about their financial future.

In a Chapter 13 bankruptcy, a debtor is disallowed from incurring new debt. But what happens if an individual suddenly falls ill and is unable to work, or he or she faces another hardship that makes it impossible to comply with the bankruptcy plan? In these instances, it may be possible to obtain what is known as a hardship discharge. In order to qualify for such a discharge it must be shown that the hardship arose through no fault of the debtor, creditors must have received as much in payments up to that point as they would have had the debtor filed for Chapter 7 bankruptcy, and it is impossible to modify the bankruptcy plan.

Though this type of discharge is more limited in scope than a traditional discharge upon completion of the bankruptcy plan, it can still provide financial stability in a time of difficulty. However, those entering the bankruptcy process should realize that this option is very limited, and should not necessarily expect it to come into play in their particular circumstance.

With that being said, unforeseen events often take Wisconsin residents by surprise and leave them in difficult situations. Therefore, those thinking about bankruptcy and those having trouble completing their bankruptcy plan should think about discussing the matter with a qualified attorney.

Source: US Courts, "Chapter 13 - Bankruptcy Basics," accessed Jan. 11, 2016

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