Chapter 13 Bankruptcy: What If You Pay Off Your Debts Early?

Filing for Chapter 13 bankruptcy is one option to better manage your debt. However, you must be well aware of what will happen if you choose to pay off Chapter 13 early. It may pose serious consequences that can put a premature end to your bankruptcy term.

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What Happens If You Pay Off Chapter 13 Early?

There is one important detail to remember should you decide to pay off your Chapter 13 debts early. You may be expected to pay for all of your debts in full. 

This includes all of the debts in your repayment plan. For this reason, many would think that paying off debts in Chapter 13 early is impractical. Unless, of course, you unexpectedly come into a large sum of money and can suddenly afford to pay all of your debts in full. 

Here are the things you need to consider before paying off your Chapter 13 ahead of time.

You May Save Money On Interest

If you are paying interest on your bankruptcy plan, paying it off early may save you money in interest payments.

Your Plan May End Sooner

Paying off your Chapter 13 plan early can get you out of bankruptcy sooner. This can help you move on with your life and rebuild your credit.

Talk To Your Bankruptcy Attorney

Before you decide to pay off your Chapter 13 bankruptcy plan early, you should speak with your bankruptcy attorney. Your lawyer can advise you on the best course of action. They can also help you understand the impact that paying off your plan early may have on your bankruptcy case.

It is in your best interest, then, that you speak with a bankruptcy lawyer before making the decision.

Reasons You Could Be Penalized

In some circumstances in life, individuals are rewarded for paying off their debts early. For example, individuals who pay off their home mortgages ahead of time end up paying less money to the bank. They can avoid paying as much interest as those who take longer to pay off their mortgages.

Perhaps, you do not desire any rewards from paying off early. Instead, it’s your bankruptcy restrictions you’d want to get rid of. For example, you might think you can travel more freely, or start a business or an investment portfolio if your bankruptcy is lifted. You’d be surprised to know that you can still do these under Chapter 13.

As long as you make regular payments and stick to your Chapter 13 repayment plan, you can still travel freely. You can even start a business and start an investment portfolio, with the approval of the bankruptcy court. So there is no real pressing need to pay off your Chapter 13 obligations at once. You will still have a lot of freedom while you are legally declared bankrupt as there are no laws that restrict your choices.

Speak With A Bankruptcy Attorney Before Paying Off Early

Early Pay Off Chapter 13 Bankruptcy Austin TXIf you’re considering paying off your Chapter 13 bankruptcy plan early, it’s important to talk to a bankruptcy attorney first. A Chapter 13 bankruptcy plan typically lasts three to five years and requires you to make monthly payments to your creditors. However, if you come into money or are able to pay off the remaining balance early, it may seem like a good idea to do so. 

Do note that paying off early may result in losing the benefits of the bankruptcy plan. A bankruptcy attorney from Lincoln-Goldfinch Law can help you understand the potential consequences of paying off early. They can also advise you on the best course of action.


Paying off your Chapter 13 plan early can have serious financial implications. For one, you may have to pay all of your debts in full. This negates the purpose of filing for Chapter 13 in the first place and can lead to various consequences. With that said, it’s important to work with a bankruptcy attorney to ensure that the process goes smoothly.

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