By the time most people file chapter 7 New York bankruptcy, they’ve concluded that there’s really nothing more they can do to repay their debts. They can’t work more jobs or magically earn more money. Thus, their hardship entitles them to a discharge.
Chapter 13, by contrast, is aimed at debtors with some hope of repaying their obligations. Debtors might be moving along just fine in their repayment plans, however, but then suddenly find themselves alone, ill, or unemployed (and sometimes a combination of them). At that point, their cases hit a wall. Focusing on unemployment in particular, converting a case to chapter 7 might require debtors to take the means test, which they may fail because their recent current monthly incomes might be too high. Dismissal won’t help either.
For these debtors, the chapter 13 hardship discharge may be the best alternative. As I explained a while back, to prove the need for a hardship discharge, debtors must show that their failures to make plan payments were due to reasons for which they “should not justly be held accountable.” A debtor must also show that the hardship discharge would not give him or her an advantage over unsecured creditors than continuing the chapter 13 plan. Finally, modifications to the plan must not be practicable.
For debtors hoping to use a rough economy as grounds for a hardship discharge, they will be concerned with the first point: plan failures due to circumstances beyond their control. That might simply be unemployment for some debtors, but others may need to work harder to make their cases. Low-skill workers will need to show that whatever modest-paying work is available won’t be sufficient to sustain their chapter 13 plans.
Debtors who are highly skilled are in a similar boat, provided their field isn’t growing despite the rest of the economy. One dubious advantage they have is that their industries might run into difficulties without the rest of the economy going bad. A crucial commodity might suddenly become very cheap, or computers might replace them. “Retooling” to find new work may not be practical, hence a hardship discharge.
Regardless of a worker’s skill level, it should be possible to use unemployment and the surrounding economic context to justify a hardship discharge. If your chapter 13 case hasn’t gone well, then you will need an experienced New York bankruptcy lawyer to ensure that you can offer the best reasons for relief.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Chapter 13 bankruptcy attorney Brooklyn NY Bruce Weiner for a free initial consultation.