Two Options When You Cannot Complete Your Plan
When a Chapter 13 debtor can no longer make plan payments, two primary options exist: request a hardship discharge under Section 1328(b), or voluntarily dismiss the case. The choice between them has significant consequences.
Side-by-Side Comparison
| Factor | Hardship Discharge | Voluntary Dismissal |
|---|---|---|
| Debts eliminated? | Yes (Ch.7-equivalent debts) | No -- all debts revive |
| Requirements | Three-element test | Generally available as of right |
| Credit report | Shows as discharged | Shows as dismissed |
| Discharge bar triggered? | Yes (1328(f) applies) | No discharge bar |
| Filing bar triggered? | No 109(g) bar | Possible 109(g) bar |
| Can refile immediately? | Subject to discharge bars | Yes (subject to 109(g) and stay limits) |
| Creditor objection? | Creditors can object | Creditors can oppose dismissal |
When Hardship Discharge Is Better
- You have significant unsecured debt that a discharge would eliminate
- You do not anticipate needing to file bankruptcy again soon
- Your circumstances genuinely qualify (medical disability, permanent job loss)
- You have already paid more than creditors would have received in Chapter 7
When Dismissal Is Better
- You do not qualify for hardship discharge (the circumstances were within your control)
- You want to preserve the option to file Chapter 7 without discharge bar complications
- You plan to refile Chapter 13 immediately with a modified plan
- Your situation is temporary and you want a clean slate to refile when circumstances improve
Key difference: Dismissal puts you back where you started -- all debts revive, all liens revive, and creditors can resume collection. A hardship discharge eliminates qualifying debts permanently. If you have significant dischargeable unsecured debt, the hardship discharge is almost always the better option when available.
Third Option: Conversion to Chapter 7
There is also a third option: converting your Chapter 13 case to Chapter 7 under Section 1307(a). This gives you a fresh Chapter 7 discharge without needing to meet the hardship discharge requirements. However, conversion to Chapter 7 means your non-exempt assets could be liquidated, and you must pass the means test. This option is explored in detail at dismissedbankruptcy.org.
Check Your Options
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Related Resources
dismissedbankruptcy.org -- What happens after dismissal and next steps
Requirements -- The three elements of hardship discharge
chapter13plan.org -- Chapter 13 plan modification options
dischargebar.org -- Discharge bar timing after hardship discharge