Chapter 13: There Are Times When Not To Pay Off Your Case

Chapter 13 Question:

The question arose recently as to whether or not a person should pay off their chapter 13 with inherited money that was received after the case was filed. The answer to that really depends upon whether or not the person is in a 100% paid back or whether or not the person is in a less than 100% pay back. If you are paying back less than 100%, then your case needs to last at least 36 months. If you make the mistake of prepaying or overpaying in a 10% case, you will be forced to pay in additional funds which were not actually required.
If, on the other hand, you are in a 100% repayment plan, then you can pay off the case at any time with inherited funds at no detriment to you. The video below talks about just such a situation and the advice from the attorneys follows suit.

Opinion:

Whenever you are in a Chapter 13 bankruptcy case, you should consult with your attorney before making any drastic changes.  Deciding to pay off your case is a drastic change.  You may actually be hurting yourself if you pay the case off too soon.  Unless you are in a 100% repayment plan, it will probably make more sense to wait.  In any event, your attorney will be able to run the numbers, check with the Trustee’s website and then make a recommendation to you.

It is certainly not often when someone can actually pay off the case early.  However, it does happen on occasion.  It could be inherited funds or a family member trying to assist the debtor.  The issue can be handled very well by your attorney.  Thus, before you do anything, get in touch with your attorney and make your intentions known.

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