The filing of a chapter 13 bankruptcy is voluntary. In chapter 13 bankruptcies, debtors make monthly payments to the trustee’s office to pay off a portion of their debts. The length of the payment plan can range from 36 months to 60 months.
If the household income is less than Minnesota’s median income for a household, the applicable commitment period is 36 months. If the Household median income is over Minnesota’s median income for a household, the debtor must have a minimum 60 month commitment period.
A debtor can pay off a chapter 13 bankruptcy early, but 100% of the unsecured debt must be paid in full. In many chapter 13 bankruptcy filings, unsecured creditors are only receiving a percentage of the debt owed to them. For example, unsecured creditors may file proof of claims for $50,000, but the debtor is only paying into the plan $10,000 or 20% of the unsecured debt. In order to pay the plan off early, the debtor would need to pay the entire $50,000.
Occasionally, there is a scenario where a debtor is in a position to pay off the chapter 13 early. This usually happens in situations where the debtor receives a windfall of money, like an unexpected inheritance. But for most chapter 13 debtors, steadily making the plan payments is the most advantageous strategy. If you are in a position where you believe you can pay off the chapter 13 plan early, be sure to speak with your attorney prior to paying any extra into the plan.
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A chapter 13 bankruptcy can be paid off earlier than the commitment period, however, this requires that all unsecured creditors be paid in full. Contact the attorneys at Kain and Scott and see us at www.kainscott.com.
