If a court approves your Chapter 13 bankruptcy filing, you will have three to five years to complete a repayment plan that will pay off a significant amount of your debts. But you may wonder if you should try to complete your bankruptcy ahead of schedule. Since exiting Chapter 13 early comes with some risk, this is an option to take with caution.
The problem with leaving Chapter 13 early is that you lose access to legal options to stave off creditors or deal with debt. As a result, if your situation takes a turn for the worse, you will find yourself at the mercy of creditors again. Here are some situations that might become a problem if you complete Chapter 13 too soon.
You lose the ability to discharge debt
Financial fortunes can change rapidly. For example, you may experience a sudden windfall of money from an inheritance or a court judgment. This is enough to pay off a large portion of your debt. Your income will cover the remainder. But then you lose your job due to economic problems or a personal injury.
Abruptly, the money you counted on to finish off your debt is no longer available. According to Bankrate, if you remain in Chapter 13, you could still seek a hardship discharge to deal with the debt you cannot pay. Leaving Chapter 13 early deprives you of this tool.
You expose yourself to creditors
The automatic stay imposed by a judge in bankruptcy puts a stop to efforts from creditors to collect from you. They cannot initiate lawsuits against you, garnish your wages or contact you about your debt. But if you leave Chapter 13 bankruptcy, creditors can resume collection actions against you.
You might feel confident that you have settled all your debts, so your creditors should have no reason to come after you. Still, you might find it beneficial to wait a little longer to make sure you have no outstanding obligations.
