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Often a debtor is in the process of losing a job or becoming disabled and may need to file as a Chapter 13 but completing a Chapter 13 plan is questionable because disability is eventually certain. The debtor may start their Chapter 13 with health problems include later medical debts and eventually obtain the early hardship discharge or convert to a Chapter 7.

This allows the debtor to file now and immediately get the protection they need but delay getting the discharge until all of the medical debts are in.  If the debtor filed a Chapter 7 bankruptcy less than 8 years ago the debtor may need to wait out until he can file as a Chapter 7.

Obtaining Hardship Discharge

Medical debt incurred after filing a Chapter 13 is simply added to the petition and those medical debts may be discharged later. The Chapter 13 debtor can ask the court for an early hardship discharge under 11 USC §1328(B) when:

  1. The debtor’s failure to complete plan payments is due to circumstances beyond the debtor’s control through no fault of the debtor;
  2. Creditors have received at least as much as they would have received in a Chapter 7 liquidation case; and
  3. Modification of the plan is not possible.

This allows a debtor a huge benefit over a Chapter 7 or debt settlement if he can’t complete a plan. To get the hardship discharge a debtor has to supply proof that they qualify for a Chapter 13 hardship discharge under 11 U.S.C. § 1328(b). Injury or illness that precludes employment sufficient to fund even a modified plan may serve as the basis for a hardship discharge. The case that explains how to get a Chapter 13 early hardship discharge is: In re Bandilli, 231 BR 836, (BAP 1st Circuit 1999).

The six Bandilli criteria are:

  1. Whether the Chapter 13 debtor has presented substantial evidence that he or she had the ability and intention to perform under the Chapter 13 plan at the time of confirmation
  2. Whether the Chapter 13 debtor materially performed under the plan from the date of confirmation until the date of the intervening event or events
  3. Whether the intervening event or events were reasonably foreseeable at the time of confirmation of the Chapter 13 plan
  4. Whether the intervening event or events are expected to continue in the reasonably foreseeable future
  5. Whether the Chapter 13 debtor had control, direct or indirect, of the intervening event or events
  6. Whether the intervening event or events constituted a sufficient and proximate cause for the failure to make the required payments.