Chapter 13 Payments
Chapter 13 payments are established as part of Chapter 13 bankruptcy filing. The debtor must make regular payments directly to an assigned Trustee who oversees the case. The Trustee will then disperse payments to creditors until accounts are paid in full. In some instances, chapter 13 payments can be made through payroll deductions if approved by the bankruptcy court.
Once bankruptcy has been approved, chapter 13 payments are outlined in the debtor's repayment plan. Regular payments are made to repay creditors, tax liens and if the debtor owns a home, chapter 13 repayment plans can help stop foreclosure.
In the event the debtor fails to make chapter 13 payments in a timely fashion, the court may dismiss the case or require the debtor to liquidate their assets under Chapter 7 Bankruptcy Code. If the debtor owns property and fails out of bankruptcy, the lender has the right to initiate foreclosure proceedings.
Chapter 13 bankruptcy is available to every citizen residing in the United States. However, in order to file chapter 13 certain eligibility requirements apply. These include outstanding unsecured debts must be less than $307,675 and secured debts must be less than $922,975. Additionally, the debtor is required to undergo credit counseling through an approved agency within 180 days prior to filing.
At the time of filing, the debtor must submit a certificate of credit counseling, a debt repayment plan, proof of income and expenses, and copies of the most recent year tax return. The debtor must include a detailed list of all creditors and amounts due, as well as a list of monthly living expenses including food, shelter, utilities, taxes, transportation, shelter and healthcare expenses.
Filing chapter 13 typically stops most collection actions against the debtor. However, it does not dismiss balances due to creditors. As long as payments are made to the Trustee and disbursed in a timely fashion, no further action will be taken against the debtor. If the debtor is unable to make payments according to their chapter 13 agreement, the creditors can move forward with collection actions.
If circumstances arise that cause the debtor to become unable to make chapter 13 payments, he must contact the Trustee immediately. If the problem is temporary, the Trustee might agree to reducing payments or extending the repayment period. If the problem could potentially be long-term, the court may modify the plan, discharge debts on the basis of hardship, convert to Chapter 7 liquidation, dismiss the Chapter 13 case or suspend payments.
Published on April 29, 2008 at 11:03 AM
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