Paying off Chapter 13 Bankruptcy

Filing for relief under Chapter 13 is the only option that many have when the wheels of fortune turns against you. When a debtor files a petition for Chapter 13 bankruptcy, he is expected to submit to the Court the payment option based on his income and expense. The Court will thoroughly scrutinize the same and if satisfied will appoint a trustee to look after into the events. The debtor adjudged as bankrupt has to mandatorily submit an amount as agreed upon and approved by the Court to the trustee every month. The trustee, on its receipt, will distribute the same so obtained amongst the various creditors as stated in the agreement. Typically, this restructured financial plan continues to three years, except under certain extreme situations, where the Court permits a sixty month repayment plan. Any failure from the part of the debtor to submit this money can lead to the conversion of Chapter 13 bankruptcy to Chapter 7 liquidation.

The money that is to be transferred every month to the trustee is calculated on the basis of the income of the debtor, after making necessary deductions for basic necessities. But, there may arise circumstances when the debtor comes into the possession of a larger sum of money through various reasons. It could be an increase in his salary or a better job prospect earning him larger income. Sometimes the death of a dear one may lead to the inheritance of a property that holds value. If the debtor comes into the possession of the inheritance during the time frame allotted he is mandatorily demanded to include the same into the payment plan and submit the latest payment program to the Court for approval. Whatever be the reasons for the payment, premature payment is permitted by law.

In the event of paying off Chapter 13 bankruptcy at an amount higher than the initial sum of money, the law might require the debtor to compensate in full the amount due to creditors who had initially agreed to forego certain sum due to them. The earlier repayment to all the parties is highly beneficial as it relieves the debtor off his debt and can go a long way in pushing his credit standing.