William G. Schwab and Associates
811 Blakeslee Blvd. Dr. East (PA Route 443) PO Box 56 Lehighton, PA 18235
Tel 610-377-5200 Fax 610-377-5209
Bankruptcy September 19, 2014
Personal Injury
Criminal Law
Elder Law
Estate Planning/Probate
Real Estate

Certain Retirement Plan Interests Protected from Creditors

In 1992, the United States Supreme Court resolved a long-standing conflict in the federal courts regarding whether a debtor's retirement ...(more)


Bankruptcy and Stopping Foreclosures

Prior to the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), directly upon filing for ...(more)


Application of the Absolute Priority Rule to Confirm a Chapter 11 Plan

In a Chapter 11 bankruptcy case for business reorganization, a bankruptcy court must only confirm a debtor's business reorganization plan ...(more)


Roles of the Bankruptcy Judge

A United States bankruptcy judge has the ultimate discretion whether to grant requests for bankruptcy relief. In addition, the judge can issue ...(more)


Bankruptcy Law In The News

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The Scope of a Chapter 13 "Hardship Discharge"

Chapter 13 bankruptcy allows a debtor to reorganize debt according to a court-approved repayment plan, which provides for the scheduled repayment of the debtor's creditors. Upon completion of all payments, the debtor receives a "superdischarge" from all debts provided for by the plan.
In limited circumstances, when the Chapter 13 debtor is unable to complete all payments required by the plan, the debtor may request the court to grant a "hardship discharge."
When a "Hardship Discharge" is Permitted
Under Section 1328 of the Bankruptcy Code, a "hardship discharge" is available to a debtor that has not completed payments under a Chapter 13 plan, only if all of the following conditions are satisfied:
  1. The debtor's failure to pay is due to circumstances for which the debtor should not justly be held accountable;
  2. The creditors received at least as much as they would have received if the debtor's estate had been liquidated under Chapter 7; and
  3. Modification of the plan is not practicable.
Non-Dischargeable Debts
The benefit of a Chapter 13 "hardship discharge" is that it allows the debtor to retain assets which would have been liquidated in a Chapter 7 case. However, the grant of a "hardship discharge" prohibits the debtor from taking advantage of the broad Chapter 13 "superdischarge" that would have otherwise been available.
Rather, the debtor is limited to the same discharge he would have received under Chapter 7. Specifically, upon being granted a Chapter 13 "hardship discharge," the debtor will not be discharged of debts that are the result such improprieties as:
  • Fraud
  • Willful and malicious injury
  • Death or personal injury caused by the debtor's drunk driving
Furthermore, a "hardship discharge" does not discharge the debtor from debt on claims where the last payment is due after the date of the final payment under the plan.
Other Limitations
Section 1328 prevents the court from granting a discharge in the following cases:
  • In a case filed under Chapter 7, 11, or 12 during the 4-year period preceding the date of the order for relief; or
  • In a case filed under Chapter 13 during the 2-year period preceding the date of such order.
Furthermore, the debtor must complete an instructional course concerning personal finance management before any discharge can be granted. In addition, the court may not grant a discharge until after a hearing in which the court determines that there is no reasonable cause to believe:
  • Section 522(q)(1) may be applicable to the debtor; and
  • There is pending any proceeding in which the debtor may be found guilty of a felony which, under the circumstances, demonstrates that the filing of the case was bankruptcy abuse or liable for a debt arising from
            -a violation of any Federal or State securities laws 
            -fraud, deceit, or manipulation in a fiduciary capacity
            -violation of the Racketeer Influenced and Corrupt Organizations (RICO) statutes
    • "racketeering activity" means any act or threat involving murder, kidnapping, gambling, arson, robbery, bribery, extortion, dealing in obscene matter, or dealing in a controlled substance or listed chemical, which is chargeable under State law and punishable by imprisonment for more than one year as well as any act involving violations of similar Federal law
           -and any criminal act, intentional tort, or willful or reckless misconduct that caused serious physical injury or death to another individual in the preceding 5 years.

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