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Can You Pay Off Your Chapter 13 Bankruptcy Plan Early?

Filing for bankruptcy under Chapter 13 is a difficult decision that can affect your finances and emotional well-being for years to come. Chapter 13 bankruptcy allows debtors to pay a portion of their debt over a period of time.

If you are currently in a Chapter 13 bankruptcy plan, you may be wondering if you can pay off your plan early. Paying off your Chapter 13 bankruptcy plan early is a complicated matter, which is why you might need to speak with an attorney. Our Oakland Chapter 13 bankruptcy attorney can help you decide if it is the right choice for you.

Chapter 13 Bankruptcy and Disposable Income

Before we dive into the specifics of paying off your Chapter 13 plan early, you need to understand how Chapter 13 bankruptcy works. Chapter 13 bankruptcy is a reorganization plan (wage earner’s plan) that allows debtors to pay off their creditors over a period of three to five years, according to the website of the Administrative Office of the U.S. Courts. The key to a Chapter 13 bankruptcy plan is disposable income.

Disposable income is the amount of money that you have left over each month after paying for necessary expenses such as housing, food, and transportation. This disposable income is what you will use to pay off your creditors under the terms of your Chapter 13 plan.

Reasons Why You Cannot Pay Off Your Chapter 13 Bankruptcy Plan Early

While it may seem like a good idea to pay off your Chapter 13 plan early, there are several reasons why it may not be possible or advisable to do so. Here are three common reasons why you cannot pay off your Chapter 13 plan early:

  • You must adhere to the timeframe of your contract. When you file for Chapter 13 bankruptcy, you sign a contract that outlines the terms of your repayment plan. This contract is binding, and you must adhere to the timeframe of the plan unless you are granted permission from the court to modify it.
  • You will most likely not be granted a discharge. One of the benefits of Chapter 13 bankruptcy is that debtors are eligible for a discharge of their remaining debt after successfully completing their repayment plan. However, if you pay off your plan early, you may not be eligible for a discharge because you have not completed the full terms of your plan.
  • Creditors may object to early payoff. If you pay off your Chapter 13 plan early, your creditors may object to the early payoff because they will receive less money than they were originally promised under the terms of your plan.

While there are several reasons why you should not pay off your Chapter 13 plan early, there are some exceptions to this rule. You might want to discuss your case with an attorney to understand whether or not you should pay off your Chapter 13 bankruptcy plan early.

Discuss Your Case with a Bankruptcy Attorney

Deciding whether or not to pay off your Chapter 13 bankruptcy plan early can be a complex and difficult decision. While paying off your plan early may seem like a good idea, there are several reasons why you should consider not doing so. Schedule a consultation with a bankruptcy attorney at the Law Offices of Melanie Tavare to learn about your options. Call 510-255-4646 today. 


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