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I recently filed chapter 13 bankruptcy and I am now on a payment plan. Is there any advantage in paying it off early?

Dallas, TX |

I am on a 60 month payment plan and was wondering will it help my credit if I pay it off early. I think I can probably pay it off in half of that time. If it's not going to help my credit then I'll pay it out over the whole 60 months.

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Chapter 13 will show on your credit report for 7 years from the date it was filed. That being said, once you obtain a discharge, you can start re-establishing credit and if you don't default on any new debt, your credit score should recover quickly. I have had clients reach the mid-600's credit score one year after discharge, and 700+ after two years.

I don't know about the Northern District of Texas where you are, but here in the Southern District, they would not let you pay off your chapter 13 plan early unless you were paying 100% of your unsecured debt. If you are, terrific and there would not be any harm to pay it off more quickly.

Otherwise, if you're not paying 100% of your unsecured debts, then they would expect you to make your best effort and pay for the entire length (or most all of the entire length) of the plan.

You should consult with an experienced chapter 13 lawyer in your district, to get the details of how it works in your district. But I would expect it to be the same, or similar to here in the Southern District.

We are a debt relief agency and we help people file for relief under the bankruptcy laws.


It would not help your credit and if you are paying less than 100% to your creditors it could result in your having to pay more to your unsecured creditors. In other words, if you consistently make higher payments than your plan calls for the trustee may determine that you have the ability to pay more of your income to your unsecured creditors and require that your plan payment increase. Now if your plan already calls for your unsecured creditors to receive a 100% payout, then there is no reason not to pay it off early if for no other reason than to get out from under the eye of the bk court and trustee sooner. If you have an attorney, discuss the impact of making extra payments to your plan with him or her.

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So, as others have noted, there are pros and cons to paying off early. You absolutely need to discuss this in detail with your attorney before you make any decision about how to proceed.

I am licensed only in Texas. Offering information of a general nature in response to a question is not intended to be legal advice in your state.


You should go see you attorney, unlikely an advantage, but depends on your median income on whether or not you can do this.


Paying off your case early in and of itself has no impact on your credit score. However you will have more freedom to take positive steps to reestablish your credit. You will also be free from court oversight and no longer need permission to incur debt. There are circumstances where you need court permission to pay off early and in some instances it requires a higher return to your creditors, so make sure you consult your attorney prior to paying extra or attempting to pay off your case early.

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