Hardship Discharge in Chapter 13: When You Can't Finish the Plan

How does a Chapter 13 hardship discharge actually work?

It is a court order, requested by motion, that discharges certain debts even though the confirmed plan was never paid in full. The authority is 11 U.S.C. § 1328(b): at any time after confirmation of the plan, and after notice and a hearing, the court may grant a discharge to a debtor who has not completed payments only if three conditions are met.

Two features of that sentence matter to you. First, it is available only after confirmation — a case that fails before the plan is confirmed is not in hardship-discharge territory. Second, the statute says "may," not "shall." Even when the three conditions appear satisfied, the decision sits with the judge after creditors have had notice and an opportunity to be heard.

Several districts describe the process in the same three steps: the debtor files a motion, the court sets a hearing, and the court enters an order granting or denying it (Bankr. D. Minn. official guidance — Hardship Discharge).

What are the three requirements the court applies?

11 U.S.C. § 1328(b) lists them, and they are conjunctive — all three, not the best two.

The first is fault. Your failure to complete payments must be due to circumstances for which you should not justly be held accountable. The Middle District of Florida's procedure manual restates this as "circumstances beyond the debtor's control and through no fault of the debtor" (Bankr. M.D. Fla. Procedure Manual — Motion for Hardship Discharge - Chapter 13).

The second is the liquidation floor. The value, as of the effective date of the plan, of property actually distributed to each allowed unsecured claim must be at least what that claim would have received had the estate been liquidated under Chapter 7 on that date. This is the same best-interests measure a plan had to clear to be confirmed in the first place (11 U.S.C. § 1325(a)(4)).

The third is that modification of the plan is not practicable.

• Blameless circumstances — the reason you cannot pay is not something you should justly answer for.
• Chapter 7 liquidation value already distributed on each allowed unsecured claim.
• Plan modification is not practicable.

Which debts survive a hardship discharge?

More of them than survive a completed-plan discharge, and this is the practical cost of the route. 11 U.S.C. § 1328(c) says a discharge granted under subsection (b) discharges the debtor from all unsecured debts provided for by the plan or disallowed under section 502, except any debt provided for under 11 U.S.C. § 1322(b)(5) — the long-term debts being cured and maintained, such as an ongoing mortgage — or any debt of a kind specified in 11 U.S.C. § 523(a).

That second exception is the big one. Section 523(a) is the general exceptions-to-discharge list, and it expressly applies to a discharge under section 1328(b) (11 U.S.C. § 523). A completed-plan discharge under 11 U.S.C. § 1328(a) carves out only certain paragraphs of section 523(a); a hardship discharge carries the whole list.

A discharge also does not eliminate a mortgage or security interest in property, only personal liability on the debt.

What does federal law say, in its own words?

The operative text is short. 11 U.S.C. § 1328(b) provides that after confirmation and after notice and a hearing, "the court may grant a discharge to a debtor that has not completed payments under the plan only if" the three listed conditions are satisfied. 11 U.S.C. § 1328(c) then defines what that discharge reaches.

The liquidation test in § 1328(b)(2) is worded almost identically to the confirmation standard in 11 U.S.C. § 1325(a)(4), which requires that the value, as of the effective date of the plan, of property to be distributed on each allowed unsecured claim be not less than what would be paid in a Chapter 7 liquidation. The difference is tense: at confirmation the court looks at what the plan promises; on a hardship motion it looks at what was actually distributed.

Chapter 12 carries a parallel provision with the same three conditions (11 U.S.C. § 1228(b)), which is why court guidance often addresses both together.

Where do local court rules change what you file?

The three statutory conditions are federal and do not vary by state. What varies is the paperwork, and it varies enough to matter.

Some districts require an affidavit with both legal and factual statements showing entitlement to the discharge (Bankr. M.D. Ala. R. 4004-1). South Dakota requires the motion itself to describe the blameless circumstances, explain why modification is not practicable, and attach a liquidation analysis (Bankr. D.S.D. R. 3072-1B). New York's Northern District requires service on the trustee, the United States trustee, and all creditors at least 21 days before the hearing, with a proposed order attached (N.D.N.Y. LBR 4004-2). Kentucky districts require a specific certification form filed with the motion, and warn that failing to file it may result in denial (KYEB LBR 4004-5; KYWB LBR 2083-1).

Check your own district's local rules and forms before drafting anything. Find your court through the court finder.

What does this look like in practice?

A common shape: a plan is confirmed, payments run for a couple of years, and then a disabling illness or a permanent job loss ends the household income the plan was built on. The debtor's lawyer first looks at whether the plan can be modified — a lower payment, a different term — because § 1328(b)(3) requires that modification not be practicable. If modification can carry the case, that is generally the path, and the hardship motion is not available.

If modification cannot work, the next question is the liquidation floor: have unsecured creditors already received at least what Chapter 7 would have paid them? Where a plan has been running for years and the estate held little non-exempt property, that floor is often already cleared. Where the case is young, it frequently is not.

The motion is then filed and served, creditors get notice, and the court holds a hearing before entering an order (Bankr. D. Minn. official guidance — Hardship Discharge).

What documents and information are involved?

The motion is the core document, and it needs to speak to each of the three statutory conditions rather than simply describe a hardship. Beyond it, districts commonly require several attachments.

A financial management course certificate is required in Chapter 13 before a hardship discharge is entered, and multiple districts list it explicitly (Bankr. M.D. Fla. Procedure Manual — Motion for Hardship Discharge - Chapter 13; Bankr. S.D. Ind. official page — Hardship Discharges; Bankr. D. Minn. official guidance — Hardship Discharge). Indiana notes the requirement is waived where the debtor for whom the discharge is sought is deceased.

Courts also commonly require a certification about domestic support obligations, and a certificate of service showing every creditor was notified. In several districts the court prepares the discharge order itself rather than asking you to upload one (Bankr. M.D. Fla. Procedure Manual — Motion for Hardship Discharge - Chapter 13; Bankr. S.D. Ind. official page — Hardship Discharges).

• Motion addressing all three conditions in 11 U.S.C. § 1328(b), signed by the filing party.
• A district-specific certification or affidavit of eligibility, where local rules require one.
• Certificate of completion of a personal financial management course, unless waived.
• A liquidation analysis, where the local rule requires one as an attachment.
• Certificate of service on all creditors and parties in interest.

What should you ask a lawyer?

This is a motion decided by a judge on a record you build, and the questions below are the ones that usually decide the outcome. Bring your confirmed plan, your trustee payment history, and a plain account of what changed.

• Can my plan be modified instead? If so, would that be better for me than a hardship discharge?
• Have unsecured creditors already received at least Chapter 7 liquidation value under my plan?
• Which of my remaining debts fall under 11 U.S.C. § 523(a) and would therefore survive a hardship discharge?
• What happens to the long-term debts I have been curing under 11 U.S.C. § 1322(b)(5), like my mortgage?
• What certifications and forms does my district require, and by when?
• If a hardship discharge is not realistic, is dismissal or conversion a better outcome for my situation?

Frequently asked questions

Can I get a hardship discharge if my plan was never confirmed?

No. 11 U.S.C. § 1328(b) permits the court to grant this discharge only "at any time after the confirmation of the plan." If a case ends before confirmation, the hardship route is not available, and the questions become dismissal, conversion, or refiling. Talk to a bankruptcy lawyer about which of those fits your situation.

Does disability count as a circumstance I should not justly be held accountable for?

The statute does not name specific circumstances, so this is decided case by case by the judge. 11 U.S.C. § 1328(b)(1) asks only whether the failure to complete payments is due to circumstances for which the debtor should not justly be held accountable. Districts commonly restate that as circumstances beyond the debtor's control and through no fault of the debtor, and the motion is where you make that showing.

Is a hardship discharge automatic once I stop being able to pay?

No. You have to ask for it by motion, and the court grants or denies it after notice and a hearing. Several districts describe the sequence explicitly: the debtor files a motion, the court issues a notice of hearing, the hearing is held, and only then does an order granting or denying the motion issue (Bankr. D. Minn. official guidance — Hardship Discharge).

Why do I have to try modifying the plan first?

Because 11 U.S.C. § 1328(b)(3) makes it a condition: the court may grant the discharge only if modification of the plan is not practicable. South Dakota's local rule requires the motion itself to explain why modification is not practicable (Bankr. D.S.D. R. 3072-1B). In practice, if a modified plan could realistically carry the case, that is generally the route considered first.

Will a hardship discharge get rid of my student loans or support arrears?

Generally no. 11 U.S.C. § 1328(c)(2) excepts any debt of a kind specified in 11 U.S.C. § 523(a) from a hardship discharge, and section 523(a) is the general nondischargeability list. That is the main way a hardship discharge is narrower than a completed-plan discharge, which carves out only some of those paragraphs (11 U.S.C. § 1328(a)).

Does it cost anything to file the motion?

The Middle District of Florida's procedure manual lists no fee for the motion for hardship discharge (Bankr. M.D. Fla. Procedure Manual — Motion for Hardship Discharge - Chapter 13). Fee practice can differ by district, so confirm with your own court. For reference, the Chapter 13 case filing fee itself is $235 (28 U.S.C. § 1930(a)(1)(B)) plus a $78 administrative fee (Bankruptcy Court Miscellaneous Fee Schedule, Item 8).

Does a hardship discharge wipe out my mortgage?

No. 11 U.S.C. § 1328(c)(1) excepts debts provided for under 11 U.S.C. § 1322(b)(5) — the long-term obligations being cured and maintained through the plan — from a hardship discharge. Separately, a discharge relieves personal liability on a debt; it does not eliminate a mortgage or other security interest in the property itself.

Sources

• 11 U.S.C. § 1328 — Discharge · official source
• 11 U.S.C. § 523 — Exceptions to discharge · official source
• 11 U.S.C. § 1325 — Confirmation of plan · official source
• 11 U.S.C. § 1322 — Contents of plan · official source
• 11 U.S.C. § 1228 — Discharge (chapter 12)
• Bankr. M.D. Fla. Procedure Manual — Motion for Hardship Discharge - Chapter 13
• Bankr. D. Minn. official guidance — Hardship Discharge
• Bankr. S.D. Ind. official page — Hardship Discharges
• Bankr. D.S.D. R. 3072-1B
• Bankr. M.D. Ala. R. 4004-1
• N.D.N.Y. LBR 4004-2
• KYEB LBR 4004-5
• KYWB LBR 2083-1
• S.C. LBR 3015-5
• 28 U.S.C. § 1930(a)(1)(B)
• Bankruptcy Court Miscellaneous Fee Schedule, Item 8

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