Although a Chapter 13 bankruptcy debtor generally receives a discharge only after completing all payments required by the court-approved (confirmed) repayment plan, there are some limited circumstances under which the debtor may request the court to grant a hardship discharge even though the debtor has failed to complete plan payments. Such a discharge is available only to a debtor whose failure to complete plan payments is due to circumstances beyond the debtor's control.

The scope of a Chapter 13 bankruptcy hardship discharge is similar to that in a Chapter 7 bankruptcy case with regard to the types of debts that are excepted from the discharge. A hardship discharge is also available in Chapter 12 bankruptcy if the failure to complete plan payments is due to circumstances for which the debtor should not justly be held accountable.

In Arkansas, as in other states, Chapter 13 bankruptcy allows debtors to reorganize their debts and pay them off over a three to five-year period. However, if a debtor encounters unforeseen circumstances that make it impossible to complete the payment plan, they may apply for a hardship discharge. The conditions for such a discharge are stringent: the debtor's inability to make payments must be due to circumstances beyond their control, the debtor must have already paid creditors as much as they would have received under a Chapter 7 liquidation case, and modification of the plan must not be feasible. Debts that cannot be discharged in Chapter 7, such as certain taxes, alimony, child support, and student loans, are also not dischargeable under a Chapter 13 hardship discharge. This type of discharge is narrower than a full Chapter 13 discharge and is similarly available under Chapter 12 for family farmers and fishermen. Debtors in Arkansas considering a hardship discharge should consult with an attorney to understand their eligibility and the implications for their outstanding debts.