What Is A Chapter 13 Hardship Disbursement?

When an individual applies for and receives Chapter 13 bankruptcy protection they essentially promising to make repayment to creditors over a period of time decided on by the court and at a level of repayment that both manageable to the debtor and sufficient enough to ensure that creditors recoup their money. This plan is managed through by a qualified bankruptcy lawyer giving the debtor relief from constant creditor attempts to force repayment more quickly.

The idea is to give the debtor the time and space to make repayments in smaller manageable sums while retaining their assets. However, there are times that a debtor may not be able to continue with the repayment plan through no fault of their own. If a debtor falls ill or becomes incapacitated to the degree that repayment is no longer viable then they may seek a Chapter 13 Hardship Discharge. The criteria that allow this discharge includes the provision that they amount repaid by the debtor be equal to the amount the creditor would have received had the individual applied for a Chapter 7 Bankruptcy and liquidated their assets in order to repay creditors.

There is also a provision that the plan may not be modified due to the circumstances faced by the debtor. If they are faced with an illness or injury that prevents them from continuing or finding suitable employment then they may very well receive a Hardship discharge. If you are facing a similar circumstance be sure to contact a qualified bankruptcy attorney to discuss your options and rights under the law.