Is Early Payoff an Option in Chapter 13 Bankruptcy?
You may be tempted to pay off your chapter 13 bankruptcy early...
When you file Chapter 13 bankruptcy, your debt is restructured and you are required to make payments over a period of time. For your creditors, only a portion of your total debt will be repaid to them.
If you come into money (such as an inheritance), or your income increases over the lifespan of your repayment plan, you may be tempted to pay off your chapter 13 bankruptcy early. Can this be done? Is this a good idea? The correct answer is yes and no. Yes, you can pay off your debt early, but no, you really should not. The reason for this is that your chapter 13 bankruptcy has allowed a restructuring of a percentage of your debt. If your creditors see that you have made a lump sum to pay off your bankruptcy, you can be required to pay all of your debt instead of just a portion because they will assume you have the money to make a larger payoff.
Before considering early payoff in Chapter 13, consult with your attorney to find out what is the best option for you.