Legal Question in Bankruptcy in Minnesota

Re: chapter 13 bankruptcy

Short answer -- Under certain circumstances you can "pay off" your plan early.

I personally have never dealt with a client who was in a position to "pay off" a plan. However, it can be done. Consult with you attorney and let her take you through the process.

Here is a general overview of how this is handled.

You can pay ahead a few months on your plan without any problems. Whether you can pay the entire balance of you plan off depends on how many months you are into your plan, and how much of the debt your plan actually pays:

You can if your plan pays off 100% of all of your bills. If your plan pays all of the creditors 100% of the debt, you can pay off your plan at any time. Most Chapter 13 plans do not pay 100% but rather significantly reduce the amount of money you are paying back to your creditors.

You may not be able to if you have completed less than 36 months of your plan. If you have completed less than 36 months of your plan, the Chapter 13 trustees may object to an early payoff. This is because � 1325(b) of the Bankruptcy Code allows the Trustee and unsecured creditors to require that debtor pay all of their projected disposable income for three years into the plan. The trustees that object to early payoff believe that they should be able to increase the amount paid into the plan if the debtor's disposable income increases during this three year period, and if an early payoff is allowed they will not be able to do this.

However, a number of cases supported the granting of a discharge where the plan has payments are made earlier than the 36th month:

Matter of Casper, 154 B.R. 243 (N.D.Ill. 1993) [Debtors discharged their obligation under plan by paying to trustee sufficient funds to cover the 10% owed on unsecured creditors' claims as provided by plan; trustee's subsequent motion to modify plan was denied.]

In re Smith, 237 B.R. 621 (Bkrtcy.E.D.Tex. 1999) [Debtor was entitled a discharge once she used gift from her family to make lump sum payment of all monies due and owing and expected to be paid under her plan even if received several months before minimum 36-month term of plan.]

In re Easley, 205 B.R. 334 (Bankr.M.D.Fla. 1996) [Debtor moved to accelerate plan payments, using money loaned by debtor's parents and the Trustee objected. The court held that debtor was not required to increase plan payments with loaned funds.]

Matter of Koerperich, 5 B.R. 752 (Bkrtcy.D.Neb. 1980) [Debtor who files a zero-payment plan has completed the "payments under the plan" and is eligible for a discharge.]

You probably can if you have completed 36 months of your plan. If you are in the 36th or later month of your plan, the Chapter 13 trustees will usually accept payment of the balance of the plan payments at any time. ph. (612) 677-0161