What Is a Chapter 13 Hardship Discharge?

When you file for Chapter 13 bankruptcy, you commit to a repayment plan that runs three to five years. Most people complete their plan successfully. But life does not always cooperate. Sometimes things happen during those years that make it genuinely impossible to continue making payments. A serious illness, a permanent disability, a job loss in a shrinking industry. When these situations arise, the bankruptcy code provides an option called a hardship discharge.

A hardship discharge allows you to receive a discharge of your remaining debts even though you have not completed all of your plan payments. It is not easy to get, and the requirements are strict, but it exists because Congress recognized that people cannot always control what happens to them over a multi-year period.

When a Hardship Discharge May Apply

The bankruptcy code sets out three conditions that must all be met before the court will grant a hardship discharge:

The failure to complete the plan is due to circumstances beyond your control. This is the most important requirement. The hardship must be something you did not cause and could not have prevented. Medical emergencies, permanent disability, the death of a spouse who contributed to household income, or the closure of your employer are the types of events that courts consider. Quitting your job or choosing to take a lower-paying position will not qualify. The circumstances must be genuinely beyond your ability to control or foresee.

Unsecured creditors have received at least as much as they would have in a Chapter 7 case. This is called the "best interests of creditors" test. If your plan has been running for some time, there is a good chance this condition is already satisfied. The court looks at what your unsecured creditors would have received if you had filed Chapter 7 instead. If the payments you have already made through the plan meet or exceed that amount, this prong is met.

Modification of the plan is not practical. Before granting a hardship discharge, the court wants to know that you explored other options first. Plan modification is usually the first thing your attorney will try. If your income dropped, you may be able to reduce your monthly payment and extend the plan. But if the hardship is severe enough that even a modified plan is not feasible, this condition is satisfied.

Common Situations That Lead to Hardship Discharge Requests

In our practice, the most common reasons we file hardship discharge motions are:

Serious medical conditions. A client who was working and making plan payments develops cancer, suffers a stroke, or is diagnosed with a condition that prevents them from working. Medical expenses increase while income drops or disappears entirely. Even with plan modification, there simply is not enough income to fund any meaningful payment.

Permanent disability. Similar to medical conditions, but the key factor is permanence. If a client becomes permanently disabled and their only income is Social Security disability benefits, the court recognizes that the situation is unlikely to improve and that modification will not solve the problem.

Loss of a spouse's income. When a married couple files Chapter 13 jointly and one spouse passes away or becomes permanently unable to work, the surviving spouse may not be able to maintain the plan payments on a single income. If the plan was built around two incomes, losing one can make completion impossible.

Natural disasters and catastrophic events. A house fire, flood, or other catastrophic event that creates enormous unexpected expenses and disrupts your ability to earn income can qualify as a circumstance beyond your control.

How the Process Works

Your attorney files a motion with the bankruptcy court requesting the hardship discharge. The motion must explain the circumstances that prevent you from completing the plan and demonstrate that all three conditions are met. Supporting documentation is important. Medical records, disability determinations, termination letters, or death certificates help establish the factual basis for the request.

The Chapter 13 trustee and your creditors have an opportunity to object. In practice, objections are uncommon when the hardship is genuine and well-documented. The trustee reviews the case to confirm that the best interests test is satisfied and that modification was considered.

If the court grants the motion, you receive a discharge of your remaining dischargeable debts. The discharge is similar to a regular Chapter 13 discharge, but there are some differences. A hardship discharge does not cover certain debts that would be dischargeable in a normal Chapter 13 completion, such as some property settlement debts from a divorce.

Alternatives to a Hardship Discharge

Before pursuing a hardship discharge, your attorney will typically explore other options:

Plan modification. Reducing the monthly payment, extending the plan length, or adjusting the distribution to creditors. This is often the simplest solution when the hardship is moderate rather than severe.

Temporary suspension of payments. Some courts allow a temporary moratorium on plan payments during a short-term hardship, with payments resuming later. This works well for temporary job losses or short medical recoveries.

Conversion to Chapter 7. If you qualify for Chapter 7 at the time of the hardship, converting your case from Chapter 13 to Chapter 7 is an option. This would result in a Chapter 7 discharge, but it could also mean losing non-exempt property. Whether conversion makes sense depends on your specific assets and circumstances.

Voluntary dismissal. You can ask the court to dismiss your Chapter 13 case entirely. This ends the plan and the automatic stay, but it also eliminates the discharge. You would be back where you started, owing all of your original debts minus whatever was paid through the plan. Dismissal is generally the last resort.

If you are currently in a Chapter 13 plan and struggling to keep up with payments due to circumstances outside your control, do not assume your only options are to keep suffering or to lose your case. Reach out to your attorney early. The sooner we know about problems, the more options we have to address them. Learn more about Chapter 13 and other options on our bankruptcy overview page.