Bankruptcy is a perfectly legal and honest means of emerging from insurmountable debt. Even so, many people feel embarrassed by bankruptcy, and want the process to be over as soon as possible. The Chapter 7 bankruptcy process usually only takes a few months to complete, whereas the Chapter 13 bankruptcy process takes three to five years. If you have the means, you might be tempted to pay off your Chapter 13 repayment plan early—but is it worth it?
Chapter 13 Bankruptcy Basics
Chapter 13 is a type of bankruptcy that allows income-earning debtors to reorganize their debt and it pay back over a period of three to five years. First, the debtor must come up with a repayment plan that details precisely how much the debtor will pay to his creditors. Some debts can be partially paid off, while others must be paid in full. Once the repayment plan is approved, the debtor begins making monthly payments.
Terms of Early Repayment
Three to five years is a long time. If your circumstances change halfway through your repayment plan, you may wish to pay off the remainder of your repayment plan and free yourself from your obligation. However, doing so comes with a price. Your outstanding debt is discharged at the end of your repayment period—if you decide to end your repayment plan early, you will also have to pay the amount that would otherwise be discharged.
Sticking to Your Repayment Schedule
Though the idea of paying off your repayment plan early may sound attractive, you’re probably better off sticking with your plan to the end. If you have extra money, you might consider setting it aside so you can guarantee that your repayment plan will be paid off. After your repayment plan in finished, your outstanding debts will be discharged.
There are a few exceptions that allow some people to end their repayment plans early without incurring additional expenses. For help identifying whether your case is an exception, call Cutler & Associates, Ltd. at (847) 505-0380. Our Aurora bankruptcy attorneys can help you get out from under your debt and start anew.