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Paying off a Chapter 13 bankruptcy early

On Behalf of | Mar 1, 2023 | Bankruptcy, Chapter 13 Bankruptcy

If you have filed for Chapter 13 bankruptcy in California, you may wonder if paying off the bankruptcy plan is possible in a shorter amount of time. There are only two ways to get out of the mandatory payments early.

Pay 100% of all claims

The first way to get out of Chapter 13 bankruptcy early is to pay off all the claims against you. This includes claims for unsecured debt and all court and administrative fees. It does not matter where your money comes from, such as receiving an inheritance, taking on a second job or winning the lottery.

In some jurisdictions, the person declaring bankruptcy must justify why they can now pay off all their debt in less than the 36 or 60 months outlined in the original Chapter 13 agreement. Paying off the plan before the set time may require you to head back to court to have the original Chapter 13 bankruptcy plan modified by a judge, depending on where you live.

Qualify for a hardship exemption

The second way to get out of Chapter 13 bankruptcy early is to qualify for a hardship exemption. In order to receive this exemption, your creditors must have received at least the amount they would have received if you had filed for a Chapter 7 bankruptcy. Secondly, there must have been a change in your financial situation that was beyond your control and will probably not get better.

There are only two ways that a Chapter 13 plan can be ended early, and both may require the court to modify the first plan. If your circumstances have changed, it may be a good idea to check with the courts and review your options.