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The debtor must prove three elements to be granted a hardship discharge. The first, and most critical, element is that modifications of the original plan would not help. In one bankruptcy court case, In re Harrison, the debtor lost his job as a route salesman because he was hospitalized for congestive heart failure.
He sought a hardship discharge, but the bankruptcy court denied it. In denying the discharge, it reasoned that though the debtor was making less money than before, he hadn’t provided any evidence that he had sought to modify the repayment plan to account for this change in salary. Second, the debtor must have fallen behind in plan payments because of circumstances beyond her control.
Finally, each creditors must have received at least as much as he would have received in a Chapter 7 bankruptcy. If there is a change in financial circumstances that prevents the debtor from making payments according to her repayment plan, another option is to convert the case into a Chapter 7 bankruptcy proceeding.
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The debtor will go before the bankruptcy court and explain her situation to demonstrate the necessity to convert to a Chapter 7. The court must find that her reasons for doing so are genuine and unavoidable and will require her to attend a meeting with creditors and file an updated Proof of Claims to demonstrate which debts she’s paid and what remains, prior to approving the conversion.
Chapter 13 bankruptcy is a repayment plan which proposes to the court to pay back some or all of your outstanding debt to creditors. In most cases you will only pay back a portion of the outstanding debt to creditors. In a Chapter 13 bankruptcy a 36 to 60 month payment plan is proposed to the court to repay your debt.
If your gross income is above the median income for your state then a 60 month payment plan will be proposed to the court. Your Chapter 13 Bankruptcy plan will propose an amount that you will pay back to creditors and will state the amount of time in which you will pay back the amount.
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Once your bankruptcy case is filed the first plan payment is due 30 days after the case is filed. The trustee appointed to your bankruptcy case will distribute payment to your creditors. The monthly payment amount that will be required for your Chapter 13 bankruptcy plan is based on the largest amount calculated from the 3 formulas below: 1) Disposable Income- Generally the monthly payment for a Chapter 13 bankruptcy is calculated based on your income minus national standards deductions for items such as transportation, housing, food, utilities, etc.
Priority debts include generally federal and state income taxes and domestic support obligations such as spousal and child support. 3) Best Interest of Creditors – The plan must at least give unsecured creditors an amount equal to what they would have received from a Chapter 7 bankruptcy liquidation - chapter 13 bankruptcy lawyers baltimore MD. This amount is calculated by determining what is the total value of any unexempt assets.
The debtor also has a painting worth $10,000 that the bankruptcy exemptions are not able to protect. If this person were to file for Chapter 13 bankruptcy his unsecured creditors would be entitled to receive at least $10,000 (minus administrative expenses from the trustee) over the life of the plan.
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Once you complete your repayment plan term then the remaining dischargeable debt that was not paid back during the term of your plan will be discharged. This means that you will no longer be personally liable for the payment on these debts. Example: A person owes $40,000 in credit card debt and medical bills (chapter 13 bankruptcy lawyers in md).
The debtors income is above the state's median income therefore his payment plan is for 60 months. If the debtor completes his plan he would have paid $18,000 over the term of the plan. After 60 months the debtor has paid back less than half of his outstanding debt. The remaining debt would be discharged at the end of his Chapter 13 payment plan.
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