By Ryan C. Wood
The answer is an absolute yes. How that is accomplished is a different story though. But yes, a Chapter 13 Trustee after confirmation of your Chapter 13 Plan can make your employer pay the monthly Chapter 13 Plan payment directly to them each month. The key part is that this could happen after confirmation or approval of your Chapter 13 Plan of reorganization. Most of the time the bankruptcy filer makes the plan payment directly to the Chapter 13 Trustee by money order, cashier’s check and now in some jurisdictions or directly from their checking account through the TFSbillpay.com system. The Chapter 13 Plan payment has to be paid in some form of certified funds. The point of this article is about how a Chapter 13 Trustee can make your employer pay the monthly Chapter 13 Plan payment though. If you do not want this to be an issue, then never ever miss or pay your Chapter 13 Plan payment late. The trustee is not trying to make sure you are successful in reorganizing your debts by timely paying the chapter 13 plan payment you agreed to pay each month and the Court confirmed or approved by Court order.
Where Does The Bankruptcy Code Allow This?
I think Bankruptcy Code Section 1325(c) is a little known and less talked about provision of the Bankruptcy Code. As a bankruptcy attorney we focus more on the requirements for confirmation listed in Section 1325(a) and Section 1325(b). Section 1325(c) provides: “After confirmation of a plan, the court may order any entity from whom the debtor receives income to pay all or any part of such income to the trustee.” That is all it says. There are no notice provisions. No other guidelines for how the court or standing chapter 13 trustee may administer Section 1325(c) of the Bankruptcy Code. It merely says the trustee may after confirmation of the plan make any entity from whom the debtor receives income to pay all or any part of such income to the trustee. Section 101(15) of the Bankruptcy Code defines “entity” as including a person, estate, trust, governmental unit, and United States trustee. Section 1325(c) specifically says “entity.” So it would seem that a bankruptcy filer’s employer may not be an entity as defined by the Bankruptcy Code and no other language exists in Section 1325(c) that specifically says employer. This is how the is interpreted or how parties add things to the law to obtain a result they believe is correct. Is the bankruptcy filer’s employer part of the definition of a “person?” Well, the Bankruptcy Code also defines the term “person.” Section 101(41) defines a “person” includes an individual, partnership, and corporation, but does not include governmental unit with some exceptions. Section 1325(c) could and should have both person and entity in the language, but it does not.
So again, how can a Chapter 13 Trustee make the bankruptcy filer’s employer pay the monthly Chapter 13 Plan payment of reorganization? It truly seems that Section 1325(c) applies to all third parties the bankruptcy filer receives monthly income from and income not received on a monthly basis. Most people filing for bankruptcy protection under Chapter 13 do not receive income from a trust, an estate or government unit. It seems Section 1325(c) is for obtaining funds the debtor may or may not receive after confirmation of a chapter 13 plan of reorganization.
What Is The Proper Procedure To Force An Employer To Pay A Chapter 13 Plan Payment?
As mentioned before there is no procedure that I am aware of that is directly on point to let us know. I will also mention that the practice of forcing an employer to pay a monthly Chapter 13 Plan payment is rare. I will provide my opinion of what the proper procedure to force an employer (“entity” or “person”) to pay a monthly chapter 13 plan payment is later. It is just my opinion though. It seems to me at a minimum a chapter 13 debtor and their bankruptcy attorney should be given notice and an opportunity to be heard on the matter before the debtor’s employer is contacted or just receives an order in the mail to pay a certain amount to the chapter 13 trustee. The issue here is privacy and confidentiality given the bankruptcy filer’s employer usually never actually finds out their employee filed for bankruptcy protection at all. There is really no reason for an employer to ever get notice of the bankruptcy filing since the employee usually does not owe their employer any money. This is almost always the case, so an employer does not get notice of the case. Why would they? There should be a motion filed, a hearing scheduled or any opportunity to object to the requested relief, and proper notice of the requested relief served on the bankruptcy filer and their attorney before any order is served on the bankruptcy filer’s employer or an “entity” as defined under Section 101(15), Section 101(41) and Section 1325(c). Bankruptcy filings are unfortunately a public record. For someone to access bankruptcy records they must have a PACER account and pay $0.10 a page for this public right.
What Has Happened In The Real World To Force Employers To Make Chapter 13 Plan Payments?
I have rarely heard of heard of Section 1325(c) being used to force an employer to pay the monthly Chapter 13 Plan payment directly to the Chapter 13 Trustee each month. It is very rare. In the case I have heard of this process was initiated by a Chapter 13 Trustee only after the bankruptcy filer failed to timely pay the monthly Chapter 13 Plan payment voluntarily as they agreed to do each month. Let me say this again. The bankruptcy filer had every opportunity to pay the monthly Chapter 13 Plan payment in the Chapter 13 Plan they proposed that was confirmed/approved by the Court for their benefit to reorganize their debts. Failure to make plan payments happens though. Even though someone seeks relief from the Bankruptcy Code under Chapter 13 for whatever reason they fail to meet their obligation to pay the monthly Chapter 13 Plan payment each month. In this case the Chapter 13 Trustee merely uploaded an order for the Bankruptcy Court to sign, the Bankruptcy Court signed the order and then the order was served on the bankruptcy filer’s employer. No notice. No hearing. That was it. It would seem this procedure is deficient, but at the same time the reorganization of the bankruptcy filer’s debts are what the bankruptcy filer wanted and obtaining the monthly Chapter 13 Plan payment each month directly from their employer ensures the desired relief is obtained. Once the wages are in the bankruptcy filer’s hands they may or may not spend the money as directed and may or may not actually be able to pay the monthly Chapter 13 Plan payment if an emergency expense comes up like healthcare expenses or a new set of tires to get to work.
The moral to the story is if you file a Chapter 13 bankruptcy reorganization case just pay the monthly plan payment according to the terms of the Chapter 13 plan you propose and subsequently have confirmed by the Bankruptcy Court and you will not have any problems. If you fail to make the monthly Chapter 13 Plan payments the Chapter 13 Trustee administering your case could have your employer pay the Chapter 13 Plan payments directly from your pay check each month whether you like it or not.