Is it possible to pay Chapter 13 bankruptcy early? 

A Chapter 13 bankruptcy is also known as “reorganization bankruptcy” because it spreads the debt burden out in payments that are made over the next 3 to 5 years. The payment plan is based on the individual’s income, allowing them to pay back their debts though manageable installments. 

Making payments towards a Chapter 13 bankruptcy can feel like a long road, especially when you’re already drowning in debt. But these plans are designed to alleviate debts by streamlining them and putting them into one convenient payment. 

But, what happens if you get a windfall, such as an inheritance or large bonus at work? Can you use this money to pay off your bankruptcy plan in full? While this may seem like a good idea, it’s important to be aware of the possible repercussions. 

Understanding the Basics of Chapter 13 Bankruptcy

Filing for bankruptcy can feel overwhelming, but that’s where an experienced bankruptcy attorney steps in. They guide you through the complex process and help create an effective repayment plan tailored to your financial situation.

A crucial aspect they’ll address is determining what constitutes as disposable income – essentially, what’s left after reasonable expenses like utility payments and spousal support are deducted from your family income. This figure plays into how much you’ll pay creditors monthly during either the applicable commitment period (36 months) or extended commitment period (60 months).

Your lawyer will also clarify key concepts such as secured claims versus unsecured claims and explain why some debts like student loans aren’t discharged even at the end of these periods. Their expertise helps ensure that no nasty surprises pop up midway through fulfilling your payment obligations.

Paying Off Your Chapter 13 Bankruptcy Plan Early: The Pros and Cons 

Now, what happens if you get a lump sum of cash and want to pay off your bankruptcy plan early? It may seem like a move that can save you stress and potentially money. But, you’ll want to think twice before taking the plunge.

First, your repayment plan was designed with consideration for monthly expenses like utility payments and car payments as well as any unsecured claims filed against you. Changes here might impact how feasible an early payoff would be. Second, by paying off Chapter 13 early, you are required to pay 100 percent of the debt you owe instead of the reduced amount. For instance, if your attorney negotiated for you to pay 70 percent of what you owe, you wouldn’t want to pay 100 percent. 

Bottom line: If you have a windfall of cash, it’s best to put it aside to make your monthly payments. 

Seeking Creditor and Court Approval

If you decide that you want to pay your Chapter 13 plan early regardless of the repercussions, you can do so. You’ll need to make sure your finances are secure, which means being able to make the payment in full and also continue affording your monthly expenses. You’ll also need to formally request an early payoff from your creditors. They will need to approve the request, and you can expect some type of negotiation. 

Once you come to an agreement, a court will determine if the payoff can move forward. As long as it can, you’ll be able to pay off your debts and put bankruptcy behind you. Some people are willing to do this because of the peace of mind they get. 


In most cases, it’s not worth it to pay Chapter 13 bankruptcy early. It’s better to keep your lump sum of cash and use it to put towards your monthly payments. And, if you happen to run into any problems, you’ll have some cash to fall back on, which can prevent you from using your credit cards. However, we understand that each situation is unique, and some people benefit more from paying Chapter 13 early. If this is the case for you, you’ll need to get approval from your creditors and the court. 

To discuss your specific Chapter 13 bankruptcy case, contact The Law Office of William Waldner today.