If approved by the bankruptcy court, Chapter 13 payments may be made through payroll deductions in certain instances. Chapter 13 payments are established to repay creditors and tax liens, if applicable, upon approval of the bankruptcy repayment plan.
Chapter 13 bankruptcy can stop the foreclosure procedure if the debtor is the homeowner. However, if the debtor fails to emerge from bankruptcy, the lender may initiate foreclosure proceedings. In addition, the court may order the liquidation of the debtor's assets under Chapter 7 of the Bankruptcy Code. In such a case, the debtor must transfer their property to a Trustee, who will sell the assets and repay creditors.
Chapter 13 bankruptcy is available to all citizens of the United States. This chapter permits individuals to restructure their debt and make payments over an extended period. However, certain eligibility requirements must be met, including a debt balance of less than $307,675 for unsecured debts and less than $922,975 for secured debts. In addition, the debtor must receive credit counseling within 180 days prior to filing.
When filing for Chapter 13 bankruptcy, an individual is required to submit a certificate of credit counseling, a proposed repayment plan, proof of income, a detailed inventory of expenses, and a recent tax return.
When the debtor files Chapter 13, all collection actions against them cease. It does not, however, eliminate outstanding balances. As long as punctual payments are made to the Trustee and distributed, the debtor will not be subject to further action. If the debtor is unable to make payments in accordance with the chapter 13 agreement, the creditors may initiate collection procedures.
If circumstances arise that prevent the debtor from making chapter 13 payments, the Trustee must be contacted immediately. If the financial setback is temporary, the Trustee may consent to a payment reduction or an extension of the repayment period.
In situations involving long-term financial difficulties, the court may modify chapter 13 payments, discharge debts based on hardship, convert to Chapter 7 liquidation, dismiss the Chapter 13 case, or temporarily suspend payments.
Individuals who file for Chapter 13 bankruptcy are able to keep their property and begin anew. In order for the debtor to make chapter 13 payments in a punctual manner, it is essential that reasonable chapter 13 payments are arranged during the plan's creation. Otherwise, the endeavor will be in vain, and the debtor will fail to emerge from bankruptcy and lose their home, car, and other valuable assets.""
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