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 Indiana, as in other states, Chapter 13 bankruptcy allows debtors to reorganize their debts and pay them off over a three to five-year period. If a debtor is unable to complete the payment plan due to circumstances beyond their control, they may be eligible for a hardship discharge. This type of discharge is less comprehensive than the discharge at the end of a successful Chapter 13 plan but is similar to a Chapter 7 discharge in terms of the debts it can eliminate. To qualify for a hardship discharge, the debtor must demonstrate that the inability to complete payments is due to factors such as illness or injury that they could not have anticipated or prevented. Additionally, the debtor must have paid creditors at least as much as they would have received under a Chapter 7 liquidation case, and modification of the plan must not be feasible. Hardship discharges are also available under Chapter 12, which is designed for family farmers and fishermen, under similar conditions. The specific application of these rules can vary based on the interpretation of federal bankruptcy law by the local bankruptcy courts in Indiana.