CHAPTER 12 HARDSHIP DISCHARGE
A family farmer may be excused from completing payments under a plan of reorganization if payments under the plan are not completed due to circumstances for which the family farmer cannot be held accountable and other statutory criteria have been met..
Grant of Discharge of All Unsecured Debts in Plan
The bankruptcy court may grant the debtor a discharge of all unsecured debts provided for in the plan or disallowed by the court, with the exception of those types of debts which are excepted from discharge, if the court finds that such circumstances exist and that unsecured creditors already have received at least what they would have received if the debtor’s estate had been liquidated under Chapter 7 of the Bankruptcy Code.
Illness that Precludes Employment may Serve as Basis for Discharge
Injury or illness that precludes employment sufficient to fund even a modified plan may serve as the basis for a discharge. This type of discharge is often referred to as a “hardship discharge.” A Chapter 12 hardship discharge may only be granted if the unsecured creditors have received at least as much as they would have received through a Chapter 7 liquidation and if modification of the plan is not feasible.