When deciding to file bankruptcy in Indiana, you may choose a Chapter 13 bankruptcy for various reasons.
Unlike a Chapter 7 bankruptcy, which eliminates all your qualifying debts, a Chapter 13 bankruptcy allows you to pay your debts off over 3 to 5 years through a payment plan.
A Chapter 13 bankruptcy allows you to save your home from foreclosure, which is one of its biggest benefits. Additionally, your payments are made to a trustee, who distributes them to your creditors, relieving you of the burden of dealing with your creditors over the course of your plan.
Factors that can cause missed payments
However, as you probably know, life is unexpected, and factors such as a job loss, death in your family or illness can affect your ability to make payments. If that happens, what are your options?
You might qualify for a hardship discharge, which is designed for these types of situations. You must meet certain requirements to qualify.
The 3 things you must show
First, you must show that the situation that prevents you from making your payments is something out of your control and was not your fault. Next, you must show that you have already paid your creditors as much as they would have received in a Chapter 7 bankruptcy.
Finally, you can modify your Chapter 13 repayment plans if there is a change in circumstances, but modification is not possible in all situations. You can only qualify for a hardship discharge if you cannot modify your plan.
A hardship discharge does not apply to some debts
It is important to note that a hardship discharge will not get rid of debts that would not have been dischargeable in a Chapter 7 bankruptcy. For example, student loans are not dischargeable in a Chapter 7 bankruptcy, so a Chapter 13 hardship discharge would not get rid of the loans.
Proving eligibility for a hardship discharge can be difficult, and bankruptcy courts might be hesitant to grant one unless it is proven that there is no other alternative. A bankruptcy attorney can advise you on your chance of receiving a hardship discharge and help you prove your case.