Can You Complete Your Chapter 13 Repayment Plan Ahead of Schedule?

Chapter 13 bankruptcy allows individuals to reorganize their debts and create a repayment plan that lasts three or five years. One key benefit is that it gives filers the chance to keep their homes while paying down what they owe to creditors. As long as they abide by the schedule set forth by the court, any remaining nonexempt debts will be discharged once the plan is completed. While debtors typically adhere to the timeline, some may wonder whether they can finish the process before the planned end date.  

Debtors in a Chapter 13 bankruptcy can complete their repayment plan ahead of schedule, but doing so requires court approval and compliance with the Bankruptcy Code. To pay off the plan early, the debtor must satisfy all obligations outlined in the plan, including providing the full amount creditors are entitled to receive under bankruptcy law.

Factors that you should review when deciding whether to pay your balance off early include the following:

• Disposable income — Your repayment plan is based on your disposable income, which is the money left over after reasonable living expenses are subtracted from what you earn. Paying off the plan early might trigger a court review regarding the calculation of disable income. If your financial situation has improved the repayment plan was established, the court could require additional payments to unsecured creditors before granting an early payoff.
• Priority and secured debt — A Chapter 13 repayment plan must fully satisfy priority debts (such as child support, alimony, and certain taxes) and arrears on secured debts (such as mortgages or car loans). Paying off the plan early does not waive these obligations; all priority and secured debts must still be paid in full.
• Discharge eligibility — All requirements must be satisfied to close a Chapter 13 proceeding, including the completion of any court-mandated financial management courses.

Early plan completion can be beneficial if a debtor receives a windfall (such as an inheritance or lawsuit settlement) and wants to resolve their bankruptcy quickly. It may also be advantageous for individuals who wish to remove restrictions imposed during the bankruptcy, such as limits on credit use.

Paying off a Chapter 13 bankruptcy plan early can be complex and may lead to unintended consequences, such as additional creditor payments. It’s essential to consult with an experienced bankruptcy attorney to evaluate your specific circumstances and determine whether early payoff is the right decision. 

Contact Jeff Field & Associates, with offices in offices are in Douglasville, Gainesville, Bogart, Lawrenceville, Marietta and Decatur to serve Georgia clients. You can make an appointment by calling 404-381-1278 or contacting us online.