When something outside your control makes it impossible to finish a Chapter 13 plan, and no modification would fix it, the court can grant a hardship discharge under section 1328(b). It wipes out the unsecured debts the plan was paying, so long as those creditors have already received at least what a Chapter 7 would have paid them. It's narrower than a full completion discharge, and it's granted sparingly.
Three things the court has to find
The statute sets out three requirements, and all three have to be met:
- Your failure to complete the plan is due to circumstances for which you should not "justly be held accountable." A permanent disability. The death of the spouse whose income funded the plan. A business destroyed by a fire. Not a voluntary job change, not overspending, not a decision to stop paying.
- Unsecured creditors have already received, through the plan, at least what they'd have gotten in a Chapter 7 liquidation on the day the case was filed. If the liquidation test at filing said unsecured creditors were owed $9,000 and the trustee has paid them $9,500 so far, this one is met.
- Modifying the plan isn't practicable. If a lower payment or a longer term would let the plan finish, the court expects you to modify rather than discharge. Hardship discharge is for situations where there is no payment the debtor can make.
Judges in the Central District read the first element strictly. The circumstances have to be beyond your control and have to be why the plan can't finish.
What it discharges, and what it doesn't
A hardship discharge is essentially a Chapter 7 discharge granted inside a Chapter 13 case. Credit cards, medical bills, personal loans, the unsecured deficiency on a surrendered car, and the general unsecured portion of old taxes are all cleared. What survives is anything that would survive a Chapter 7: recent priority taxes, support obligations, student loans, debts from fraud or a DUI injury, or the long-term mortgage you were curing.
It also doesn't reach the debts that only a completed Chapter 13 discharge covers. The so-called superdischarge (property settlement debts from a divorce, certain willful-injury claims, and a few others) requires finishing the plan. If one of those debts is the reason you chose Chapter 13, a hardship discharge loses that advantage, and conversion may not help either.
A situation where it fits
Your plan was confirmed in 2027 at $1,100 a month. Two years in, you're diagnosed with something that ends your ability to work, and you're approved for disability benefits that come to a third of your former income. The house you were curing arrears on has to be sold. After the sale, the mortgage claim is gone, and the plan's remaining purpose was paying unsecured creditors about 15%, of which the trustee has already disbursed enough to satisfy the liquidation test.
A modified plan at the new income would pay unsecured creditors nothing further and still require a payment you can't afford. A conversion to Chapter 7 would work too, but it would mean a new trustee, a new 341 meeting, and scrutiny of the sale proceeds. The hardship discharge gets to the same discharge without any of that, and it's what we'd file.
Hardship discharge versus conversion
These two usually get considered together, and the choice is practical. Conversion is faster to start, doesn't require the court to find "hardship," and is available to almost anyone. But it opens the door to a Chapter 7 trustee looking at property as of the original filing date and at anything that changed since. A hardship discharge keeps the case where it is, with the Chapter 13 trustee who already knows it, and closes it. The tradeoff is the liquidation test: if unsecured creditors haven't yet received their Chapter 7 equivalent through the plan, hardship discharge is off the table and conversion is the only route.
The overview of Chapter 13 lays out the ordinary path to discharge. This page is about what happens when that path closes.
The motion, and what to expect
We file a motion in the Central District with a declaration explaining what happened, documentation (medical records, a death certificate, the disability award letter, the business's closure), and an accounting showing the liquidation test is satisfied. Notice goes to the trustee and all creditors. The trustee reviews it and, in a well-documented case, files a response that doesn't oppose. A hearing is set about four to six weeks out. The judge asks a few questions, sometimes of you directly by Zoom, and rules.
The debtor education course still has to be completed before the discharge issues, the same as in any case. And the hardship discharge is a contested motion, quoted separately from the no-look fee. We quote it in writing and, where possible, structure the fee to be paid from funds already in the plan.
When it isn't the right tool
Job loss alone rarely qualifies. Courts expect a person who lost a job to find another one and modify the plan. A voluntary retirement doesn't qualify. Neither does a decision to stop paying because the house lost value. In those situations, we're honest about it: the hardship discharge motion would be denied, and conversion or a modification is the realistic path.
If something has happened that you didn't cause and can't undo, book a video consultation. Naomi will look at what's been paid into the plan so far and tell you whether the three elements are there.
the first question I ask on a hardship discharge is not what happened. It's how much the trustee has paid to unsecured creditors so far. That number decides whether the motion is even possible, and people never know it. The trustee's ledger is online and I can pull it in a minute. If the liquidation figure has been met, we talk about the medical records and the declaration. If it hasn't, we're talking about conversion instead, and I'd rather say that in the first five minutes than after you've gathered a year of paperwork for a motion I can't file.
Questions people ask about this
What counts as hardship for a Chapter 13 hardship discharge?
Circumstances beyond your control that make finishing the plan impossible: permanent disability, death of a spouse whose income funded the plan, a serious illness with lasting effects on earning. Job loss by itself usually doesn't qualify because courts expect a modification instead.
Does a hardship discharge wipe out my mortgage arrears?
No. The mortgage is a secured, long-term debt and survives any discharge. If you can't continue the cure, the lender's foreclosure resumes after the case closes. The hardship discharge is about the unsecured debts.
How is a hardship discharge different from finishing the plan?
A completed plan gives the broader Chapter 13 discharge, which covers a few categories a Chapter 7 discharge doesn't, such as certain divorce property settlement debts. A hardship discharge is limited to what Chapter 7 would discharge.
Can I get a hardship discharge in the first year of the plan?
It's uncommon, because unsecured creditors usually haven't yet received what the liquidation test requires. The further into the plan you are, the more likely that element is met. Early in a plan, conversion to Chapter 7 is typically the route.
Do I still need to take the debtor education course?
Yes. The second required course has to be completed and the certificate filed before any discharge, hardship or otherwise, is entered. It's online, about an hour, and roughly $15 to $50.
Talk it through with the attorney
If a disability, a death in the family, or another event you didn't cause has made the plan impossible, call (310) 555-0184. Naomi will pull the trustee's ledger, check the liquidation figure, and tell you honestly whether a hardship discharge or a conversion is the route.