Can You Pay off Chapter 13 Bankruptcy Early?
When you file for a Chapter 13 bankruptcy in Maryland, you agree to pay back a portion or all of your debt using your future income. The payment plan amount is based on your future income and the amount of debt to be repaid and usually lasts between three and five years. Once you’ve repaid the total amount owed, the rest is discharged according to the agreement between the court and your creditors.
But if you’ve come into some money before the payment plan is over, you may want to pay off the rest of your debt to move on with discharge. While you may be able to pay off your Chapter 13 bankruptcy early, it might not be in your best interest to do so.
The Specifics of Your Chapter 13 Bankruptcy Matter
No law says you can’t pay off your bankruptcy debt early. But before you do, you should consult a bankruptcy attorney first to ensure it won’t negatively affect your payment plan.
If your payment plan was created to pay back 100% of the debt you owe, you shouldn’t face any issues repaying it early. But if the program doesn’t repay 100% of the debt owed, the courts may require you to include it in your bankruptcy filing.
Once the Trustee is aware of the increase in your estate, it could trigger an amendment to your payment plan. The amended plan may require you to pay more of the debt owed, resulting in higher payments for the rest of the planned time.
The Benefit of Sticking With Your Existing Plan
Even though it’s an attractive option to repay your debt early to move on from your Chapter 13 bankruptcy, you are probably better off sticking with the plan already in place. Of course, suppose you owe 100%, and your debts have just been restructured to prevent more delinquencies on your credit or foreclosure of your home. In that case, you’re probably safe paying it early.
If you owe less than 100%, you are usually better off saving the extra money you have now. This way, you can ensure you have the money to pay your payment plan on time until you pay it in full. Once you’ve paid it off, the rest of your outstanding debts will be discharged, and you will owe nothing more.
Find Out the Best Choice For Your Bankruptcy Situation
The law is complicated in Maryland, and bankruptcy law is no exception. Most people would benefit from not repaying their Chapter 13 bankruptcy early. Some would find that getting discharged early is a valuable solution to their problem. If you’re unsure if your situation is the exception to the rule, don’t hesitate to reach out to Mummert Law.
We can schedule a consultation to sit down together, and discuss your bankruptcy situation, how you’ve come into the money, and whether it would benefit you to end your payment plan early. Schedule an appointment with us today, so we can help you make the right decision.