The Center For Debt Management
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Chapter 13 Bankruptcy:
Individual Debt Adjustment

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The Chapter 13 Hardship Discharge

After confirmation of a plan, circumstances may arise that prevent the debtor from completing the plan. In such situations, the debtor may ask the court to grant a "hardship discharge." 11 U.S.C. § 1328(b). Generally, such a discharge is available only if: (1) the debtor's failure to complete plan payments is due to circumstances beyond the debtor's control and through no fault of the debtor; (2) creditors have received at least as much as they would have received in a chapter 7 liquidation case; and (3) modification of the plan is not possible. Injury or illness that precludes employment sufficient to fund even a modified plan may serve as the basis for a hardship discharge. The hardship discharge is more limited than the discharge described above and does not apply to any debts that are nondischargeable in a chapter 7 case. 11 U.S.C. § 523.

NOTES

1. The "current monthly income" received by the debtor is a defined term in the Bankruptcy Code and means the average monthly income received over the six calendar months before commencement of the bankruptcy case, including regular contributions to household expenses from nondebtors and including income from the debtor's spouse if the petition is a joint petition, but not including social security income or certain payments made because the debtor is the victim of certain crimes. 11 U.S.C. § 101(10A). return to text

2. In North Carolina and Alabama, bankruptcy administrators perform similar functions that U.S. trustees perform in the remaining forty-eight states. The bankruptcy administrator program is administered by the Administrative Office of the United States Courts, while the U.S. trustee program is administered by the Department of Justice. For purposes of this publication, references to U.S. trustees are also applicable to bankruptcy administrators. return to text

3. Section 507 sets forth 10 categories of unsecured claims which Congress has, for public policy reasons, given priority of distribution over other unsecured claims. return to text

4. A fee of $25 is charged for converting a case under chapter 13 to a case under chapter 7. return to text


Before You File For Bankruptcy

Filling for bankruptcy is a major event in one's life and should only be taken as a last resort. Before filing we suggest that you first speak to a certified debt counselor who has a number of alternatives that are appropriate for many debtors contemplating bankruptcy. We highly suggest that you call 1800 DEBT.COM (that's 1800-332-8266) and speak to a debt professional prior to making a final decision whether filing for bankruptcy is the right decision for you.

If you do believe that filing bankruptcy is the right decision for you, to locate a qualified and affordable bankruptcy attorney in your local area, we suggest that you call toll-free 877-828-0606.

Professional Debt Help!  Call Right Now — 1800 DEBT.COM


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