pay off chapter 13 early

Can you pay off a Chapter 13 bankruptcy early?

Can you pay off a Chapter 13 bankruptcy early?

As with most things, the answer is sometimes. If you are a below median income debtor, you can pay off the bankruptcy at any point. If you are an above median debtor, then it gets difficult. If you are paying 100% of your unsecured debts back, yes, you can pay the balance off at any time. If your plan is paying less than 100% to your unsecured creditors though, then there is a split of decisions out there.

This involves an analysis of the bankruptcy code, notably sections: 11 USC 1325 and 11 USC 1329.

The Answer lays in determining what the “applicable commitment period” of 1325(b)(1)(B) means. Does this mean that it acts as a multiplier to determine the total amount to be paid in the plan? ie: disposable monthly income x 60 months = Total to be paid to the unsecured creditors. Or does it mean that the definition is temporal (time) meaning the plan must be paid over 60 months, and can’t be paid sooner unless it pays 100%. This would account for changes in income over the 5 year case.

In Chicago, Judge Doyle has ruled that it is a multiplier in the case IN RE MATHIS. Other jurisdictions have ruled it to be temporal. Will the 7th Circuit Court ring in on if you can pay off a Chapter 13 bankruptcy early? Stay tuned.

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Terrance Leeders

Chicago Bankruptcy Attorney, husband, father, Cubs fan.

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