Seeking a Hardship Discharge in Chapter 13 Arizona Bankruptcy
Chapter 13 bankruptcy in Arizona is a long-term commitment. For those who successfully complete the process of the three-to-five year plan, a discharge of remaining debt awaits, as well as the peace of mind of having paid off a chunk of their secured, non-dischargeable debt while keeping any asset they really wanted to keep. But if something comes up during the process that prevents its successful completion, is there any option to discharge their bankruptcy before reaching the end of that plan?
Under the Bankruptcy Code, it is possible to successfully discharge a Chapter 13 bankruptcy early, under what is known as the Hardship Discharge.
You must apply for this discharge from your Chapter 13 judge. You must have paid the same amount toward your plan that you would have paid during a Chapter 7 bankruptcy. This means that, after exemptions are taken, the amount you have paid to your creditors is the amount (or more than the amount) your creditors would have been paid in a Chapter 7 liquidation. This may depend on how many assets you have, and how long you have been making payments under your plan.
The idea behind a Hardship Discharge is that, if you are not granted this discharge, you would have to convert your case to a Chapter 7, and discharge from there. In other words, the court avoids some of the hassles involved with the system and comes to the same conclusion that would have occurred if you followed the proper procedure. It is not, in other words, a way to avoid paying the rest of your plan if you do not qualify for Chapter 7 bankruptcy.
What a Hardship Discharge can do, however, if avoid some of the headache involved in converting your case, and can help you get out of your Chapter 13 plan if it is not working, or you are no longer able to make the payments. Find out from your attorney if you might qualify for a Hardship Discharge.