Should you pay off your Chapter 13 bankruptcy plan early?
Many people choose the Chapter 13 option when they file for bankruptcy. Also known as the “wage earner’s plan,” it usually consists of a three- or five-year repayment schedule. You pay the money to a trustee who then disburses it to your creditors. If you can qualify for it, it’s often preferable to Chapter 7 bankruptcy because you don’t have to liquidate assets and it can stop a potential foreclosure on your home.
Many people who enter a Chapter 13 bankruptcy repayment plan are eligible to discharge (eliminate) a certain percentage of their debt. For example, they may have to pay back only 80 percent of the total amount owed. In addition, some creditors don’t find it worthwhile to file claims in a bankruptcy case, so you may actually owe less than you think.
In most cases, if you are able to complete the repayment plan early, you will have to pay off the full amount that you owe to creditors and not be able to discharge part of the debt. Therefore, if you can take the money you would have used to complete your repayment early and save it to continue your payment plan as scheduled, that may be the best course of action
The advice of an experienced Florida bankruptcy lawyer is essential not just when you file for bankruptcy, but whenever you have questions or issues while you are in bankruptcy. If you are in a position to pay off the amount due in a Chapter 13, you and your bankruptcy lawyer should discuss your options so that you can make the wisest choice for your situation.
Source: Bankrate, “Paying off Chapter 13 plan early,” Justin Harelik, accessed Jan. 19, 2016