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 Michigan, 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 apply for a hardship discharge. The requirements for a hardship discharge include: the debtor's inability to modify the plan, unsecured creditors have received at least as much as they would have in a Chapter 7 liquidation case, and the debtor's inability to continue plan payments is due to circumstances beyond their control, such as illness or job loss. The hardship discharge in Chapter 13 is more limited than a full discharge and does not apply to certain types of debts, similar to those that would be excepted in a Chapter 7 case, such as certain taxes, student loans, alimony, child support, and debts arising from fraud. Chapter 12, designed for family farmers and fishermen, also allows for a hardship discharge under similar conditions. The specifics of obtaining a hardship discharge can be complex, and an attorney can provide guidance tailored to an individual's unique situation.