Can You Pay Off A Chapter 13 Bankruptcy Early?

You’re a couple years into your Chapter 13 plan. Things are finally looking up. Maybe you got a raise. Maybe a relative left you some money. Or maybe you won some money.

Now you’re wondering -can I just pay this thing off and be done already?

The short answer is no, chapter 13 doesn’t work like that. If you want to pay off early, you need to pay 100% of all your debts.

In this post, we’ll shed some light on why you can’t pay off a chapter 13 bankruptcy early, go over some exceptions.

How Chapter 13 Repayment Works

Chapter 13 is a type of bankruptcy where you don’t wipe out everything immediately. Instead, you pay back some (10%, 30%, maybe more) of your debts over three to five years through a court-approved repayment plan.

Your payments are based on your income and what’s left after you cover basic living expenses.

That extra cash is called your disposable income, and that’s what you send to the trustee each month. The trustee then splits it up and pays your creditors.

If your income goes up during that time, your disposable income goes up too and so will the payment to the trustee.

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The idea is to give creditors everything you reasonably can during the plan period, and not just some lump sum that looks good at the start.

Can You Pay Off A Chapter 13 Bankruptcy Early?

No, you can’t pay off a Chapter 13 plan early just because you have the money.

The court approved your plan based on time, not just a dollar amount. You agreed to pay your disposable income for 3 to 5 years and not to simply hit a payoff number and leave.

If you suddenly have more money, the court assumes your disposable income just went up. And if that’s true, your creditors are entitled to more than they were originally getting.

This is why the court and the trustee usually won’t let you pay off the plan early unless you pay 100% of all claims.

If you’re only paying back a small portion of your debt, trying to wrap things up early can actually backfire. Your creditors will push for you to pay more, not faster.

Exceptions That Let You Pay Off Chapter 13 Early

There are some exceptions and situations that make paying off Chapter 13 early possible. Let’s go over these in more detail:

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#1 Pay 100 Percent Of All Claims

This is the cleanest path to getting out early.

If you’ve got enough money to pay off every single creditor listed in your plan (plus any interest or fees they’re owed) then yes, you might be able to end things early.

That includes:

• All secured debts you agreed to pay through the plan (like car loans)
• All priority debts (like taxes or back child support)
• All general unsecured debts (credit cards, medical bills, etc.)

Once everyone’s been paid in full, the trustee and the court may approve early discharge. But this only works if ALL claims are satisfied.

#2 Qualify For A Hardship Discharge

If you don’t have enough to pay everybody in full, but something serious has happened, like you lost your job, got hurt, or had another major life change that wasn’t your fault. If finishing your plan just isn’t possible anymore, you might qualify for what’s called a “hardship discharge.”

This lets you exit the plan early and still discharge some of your remaining unsecured debt.

But it’s not a free pass. You have to show that:

• The problem is beyond your control
• You’ve paid in as much as you reasonably could up to this point
• Modifying the plan won’t fix things

Basically, the court wants to make sure you’re not just trying to duck out, but that you really can’t continue. If they’re convinced, they might clear the rest of your unsecured debt.

But you’ll still be on the hook for any debts that can’t be discharged (like student loans or some taxes).

What Happens After An Early Payoff

If you do get the court’s blessing to pay off early (either by paying everything in full or qualifying for a hardship discharge) then congrats! You’re almost done.

Once the court approves it, you’ll get your discharge order.

That means most of your remaining unsecured debts are officially wiped out. You’re no longer in the plan. No more payments. No more trustee.

Also Read: Benefits of filing bankruptcy

Just keep in mind: some debts don’t go away. Student loans, certain taxes, and anything the court said was non-dischargeable – those will stick around.

But for a lot of people, that discharge still brings huge relief.

Bottom Line

You can’t pay off a Chapter 13 bankruptcy early. Most people have to stick it out for the full 3 to 5 years, but you can finish it off sooner by paying all of your debt in full.

If you’re in a spot where early payoff feels possible, it’s a good idea to talk to a lawyer.

They can look at your plan, your payments, and your finances and help you figure out what’s actually doable.