Paying Off A Chapter 13 Bankruptcy Plan Early

This video talks about the ability to pay off a Chapter 13 bankruptcy case early.  There are times when this is not a good idea.

Jesse Barrientes:         Well, Dave, what happens if we are in this plan here for a couple years and let’s just say that I have inherited some money.  And you know what?  I never wanted to do a bankruptcy in the first place.  I just didn’t have much of a choice.  But now I find myself in a position where hey, guess what.  I can pay everybody off.

David Siegel:               If your case is paying back 100% anyway, then you can go ahead and pay it off, just like you are prepaying a mortgage or paying off your vehicle.  If however you are in a 10% or 20% plan and you just want to keep making that regular payment, you don’t want to tip your hand that you have all this available money because some trustees and some judges will say okay, now you can pay a higher percentage because you came into money.  So it’s better just to keep making the monthly payment, trickle it in, eventually your case is going to complete.  It can’t go more than five years or 60 months.  So eventually it’s going to come to an end.  Just keep making the payment, especially if you are paying less than 100% back to your unsecured creditors.

Jesse Barrientes:         But can I get out of a case before it concludes before that 60th month?

David Siegel:               Well, you can certainly get out of the case.  You can decide you want to dismiss it.  But if you dismiss your case, you are going to be back in the same position you were prepetition; creditors can come after you.  The mortgage company can foreclose.  The auto lender can repo.  So really, there’s no benefit to dismissing your case unless you become ill or you lose your job or for some other reason you just can’t continue.

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