Under a typical Chapter 13 bankruptcy agreement in Tennessee, the court grants a debtor three to five years to make payments toward a settlement that supplies creditors with a portion of the funds owed. The court determines the settlement and payment formula based on a person’s income. Only certain situations allow someone to deviate from the terms, and three conditions must be satisfied before a court will grant a hardship discharge of debts.

First, the inability to make payments must be outside of the debtor’s control. For example, a court provided relief from debt payments to an attorney and his wife after a bad stroke ended the attorney’s ability to run his business. The debtor had also satisfied the second requirement that the creditors receive no less than what they would have gotten in a Chapter 7 bankruptcy. Before the stroke, the debtor had already paid creditors $123,790 under the payment plan. He only owed $11,383.

Because a doctor deemed his stroke debilitating and said that the man could no longer work, the third legal condition had been satisfied because the plan could not be modified. His ongoing medical expenses precluded the possibility of creating a new payment schedule.

Bankruptcy courts typically accept catastrophic medical problems or death as a reason for dissolving the original terms. Otherwise, the debtor must satisfy the terms of the Chapter 13 bankruptcy in order to protect certain assets like a home or business from creditors’ claims. When debts overwhelm a person, an attorney could evaluate the situation and recommend whether or not a bankruptcy filing could provide a fresh financial start. During the process, an attorney could negotiate with creditors and present financial information to the court and pursue terms that provide relief from credit card debt or foreclosure.