A Chapter 13 plan requires you to catch up on some of your debts. For this reason, to succeed in a Chapter 13, you will need to have more income than when you fell behind on your debts. Otherwise, you will have to live on a very tight budget during the plan.
Many Chapter 13 plans fail. If you miss payments under the plan, the bankruptcy trustee will ask the court to end the plan. When this happens, you also lose the protection of the bankruptcy, and all original debts are reinstated.
In some rare circumstances, you can ask for a hardship discharge after failing to complete the repayment plan. Usually, such a discharge is available only if:
- Your failure to complete plan payments is due to circumstances beyond your control and through no fault of your own;
- Creditors have received at least as much as they would have received in a Chapter 7 bankruptcy; and
- Modification of the plan is not possible.
For example, your injury or sickness that prevents you from working can be the basis for a hardship discharge.
Updated: August 2017