What is a Chapter 13 hardship discharge?

A hardship discharge under 11 USC § 1328(b) is available to a Chapter 13 debtor who cannot complete the planned payments because of circumstances for which the debtor should not justly be held accountable. It is narrower than the standard Chapter 13 discharge under § 1328(a): it excepts more debts and requires three specific findings by the court.

What does § 1328(b) require?

Three findings. First, the failure to complete payments is due to circumstances for which the debtor should not justly be held accountable. Second, the amount actually distributed to unsecured creditors equals or exceeds what they would have received in Chapter 7 (the best-interests test). Third, modification of the plan under § 1329 is not practicable. All three are required.

What debts are excepted from a hardship discharge?

11 USC § 1328(c) limits the hardship discharge to debts allowed by § 1328(a)(1) and excepts everything that is non-dischargeable under § 523(a). That makes a hardship discharge much narrower than the regular Chapter 13 discharge. Many debts that would have been discharged at successful plan completion remain owed if the debtor takes a hardship discharge instead.

How do I prove circumstances 'for which I should not justly be held accountable'?

Typical fact patterns include severe medical disability that prevents work, death of a household earner, prolonged unemployment after job loss, or a natural disaster. Courts examine the facts case-by-case. Documentation matters: medical records, termination letters, disability awards, and budget evidence that shows the debtor's good-faith effort to keep paying as long as possible.

When should I ask for a hardship discharge vs modifying the plan?

Modify first. Hardship discharge requires the court to find that modification under § 1329 is not practicable, which means a realistic lower payment is not available. If a reduced payment over the remaining plan term would keep the case alive, that path produces a fuller discharge at the end. Hardship discharge is the alternative when even a minimum payment is no longer feasible.

Does the hardship discharge close the case immediately?

Yes. Once granted, the court enters the discharge order under § 1328(b) and the case is closed in due course. The debtor must still have received and filed the financial-management course certificate under 11 USC § 1328(g) and § 111. Any non-dischargeable balances remain owed and can be enforced against the debtor and against post-petition income.

Hardship Discharge in Chapter 13: § 1328(b)

A Chapter 13 hardship discharge under 11 U.S.C. 1328(b) lets you end your case without finishing all plan payments when something outside your control, such as illness, job loss, or a death in the household, makes completion impossible. The court must find three things: the failure is not justly your fault, creditors already received at least what Chapter 7 would have paid, and modifying the plan is not practicable. It is narrower than a regular discharge, so 523 debts still survive.

Two Discharges in Chapter 13

Chapter 13 has two distinct discharge paths. The standard path under 11 U.S.C. § 1328(a) grants discharge upon completion of all plan payments. The alternative path under § 1328(b) grants a "hardship discharge" when the debtor cannot complete the plan but meets specific statutory criteria.

The two discharges are not equivalent. The hardship discharge is narrower; some debt categories that would be discharged under § 1328(a) survive a hardship discharge.

The Three Statutory Requirements

Section 1328(b) requires the court to find all three of the following before granting a hardship discharge:

The debtor's failure to complete plan payments is due to circumstances for which the debtor should not justly be held accountable
The value, as of the effective date of the plan, of the property actually distributed under the plan to each unsecured creditor is not less than the amount that would have been paid to such creditor in a Chapter 7 liquidation
Modification of the plan under § 1329 is not practicable

All three findings are required. Missing any one defeats the hardship-discharge motion.

Circumstances "Not Justly Accountable"

The first requirement turns on causation. Debtors typically demonstrate this through evidence of involuntary events that disrupted plan completion: serious illness, death of a primary wage earner, sudden disability, layoff or business failure, family crisis. Voluntary lifestyle changes or strategic abandonment of the plan do not meet this standard.

Courts apply a fault-based analysis. The question is not whether the debtor could have done something differently in the abstract, but whether holding the debtor accountable for non-completion would be just under the circumstances.

The Best-Interests-of-Creditors Test

The second requirement is essentially the Chapter 7 liquidation comparison: have unsecured creditors received at least as much under the partial plan as they would have received in a hypothetical Chapter 7 liquidation? This calculation requires:

Determining the hypothetical Chapter 7 distribution to unsecured creditors at the plan's effective date
Comparing that to actual distributions made under the plan to date
Confirming actual distributions equal or exceed the hypothetical liquidation

If creditors have received less than they would have in liquidation, the hardship discharge is unavailable. The debtor would need to either continue paying until the threshold is reached, convert to Chapter 7, or accept dismissal.

Practical note. The best-interests test is calculated as of the plan's effective date, using values then. Asset depreciation since plan confirmation can sometimes work in the debtor's favor by lowering the hypothetical Chapter 7 distribution.

Modification Not Practicable

The third requirement asks whether the plan could be modified under § 1329 to permit completion at lower payments. Section 1329 modification is the first-line tool for income drops; hardship discharge is reserved for situations where even modification cannot make the plan workable.

Courts evaluate practicability based on the debtor's projected post-modification income, ability to sustain even minimal plan payments, and the realistic prospect that any feasible modification would actually be confirmed and completed. Where a modification could mathematically work but the debtor's financial reality remains untenable, the practicability requirement is met.

What Is Discharged

A § 1328(b) hardship discharge releases the debtor from most pre-petition unsecured debts, similar to a Chapter 7 discharge. However, the hardship discharge does not reach the broader categories that would be discharged under a regular Chapter 13 § 1328(a) discharge.

Specifically, debts excepted from discharge under § 523(a) are not discharged in a hardship discharge. This includes:

Most tax debts (with narrow time-based exceptions)
Domestic support obligations
Student loans (without an undue hardship adversary determination)
Debts for fraud, defalcation, or willful and malicious injury
Debts for death or personal injury caused by intoxicated driving
Restitution and criminal fines

What a Regular Chapter 13 Discharge Would Have Reached

A standard § 1328(a) discharge after plan completion historically reached some debts that § 523(a) excepts in Chapter 7 (the so-called "super-discharge"). The 2005 BAPCPA amendments narrowed this significantly, but the § 1328(a) discharge remains broader than the § 1328(b) hardship discharge.

Debts dischargeable under § 1328(a) but not § 1328(b) include certain claims for willful or malicious injury to property, certain claims for embezzlement or larceny, and a few other narrow categories. For most debtors, the practical difference between the two discharges is smaller than it once was, but the technical distinction remains.

Procedure

The debtor files a motion for hardship discharge under § 1328(b), supported by:

A declaration explaining the change in circumstances
Documentation of the precipitating event (medical records, termination letters, death certificates as relevant)
The best-interests calculation showing actual distributions equal or exceed Chapter 7 liquidation value
An explanation of why modification under § 1329 is not practicable

Notice goes to the trustee and all creditors. The court typically holds a hearing on contested motions; uncontested motions can sometimes be granted on the papers.

When to Seek Hardship Discharge vs. Convert

The choice between hardship discharge and Chapter 7 conversion depends on the debtor's specific facts:

Hardship discharge works when the debtor has been in the plan long enough that creditors have received approximately what they would have in liquidation, and the precipitating event is genuine.
Chapter 7 conversion may be better when the means test still permits Chapter 7 eligibility and the debtor has assets the trustee would not pursue or has already lost.
Dismissal may be the right outcome when neither path works — though dismissal leaves the debtor exposed to creditors again.

Hardship Discharge in Chapter 13: § 1328(b)

Two Discharges in Chapter 13

The Three Statutory Requirements

Circumstances "Not Justly Accountable"

The Best-Interests-of-Creditors Test

Modification Not Practicable

What Is Discharged

What a Regular Chapter 13 Discharge Would Have Reached

Procedure

When to Seek Hardship Discharge vs. Convert

Further Reading