If you are going through a Chapter 13 bankruptcy and suddenly find yourself in the position where you could pay off the bankruptcy early, you may want to know if it’s possible to do so. The truth is that you cannot typically finish the plan early unless you’re willing to pay your creditors in full.
Chapter 13 bankruptcy is designed to create a payment plan for an amount that you can easily afford. That means that if you see a difference in your income that makes it easier to pay more, you might actually see that the trustee increases your payments to send more to the creditors.
How do you know if the trustee needs to know about your raise?
When you start the Chapter 13 process, you’ll go over different facts about the process. If your payment plan is accepted, it may be with the caveat that you need to let the trustee know if your income increases. It might also be with the understanding that your payment plan is subject to change if your income increases or decreases.
Especially near the beginning of your Chapter 13 plan, it’s important for you to consider how an increase in your income could change how much you’ll pay over time. Of course, if you have the money to pay off your creditors in full, you can do that and end the bankruptcy. It’s also possible to reduce the length of the repayment plan if you pay more per month and are able to repay the creditors in full through that method.
If you have more money but not enough to pay in full, the amount you pay may rise in accordance with your new level of disposable income.
After several years on a payment plan, a raise may not necessarily impact what you pay. This is particularly true near the end of the repayment process. This is something you’ll need to discuss with your support team as you decide how to approach the bankruptcy when you’ve increased your income. Ending the bankruptcy early is unlikely unless you pay in full, but you may have other options.