§ 44.3     Employer Problems
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 44.3, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

In some jurisdictions, an income deduction order requiring the debtor’s employer to make deductions and remit payments to the Chapter 13 trustee is issued immediately upon the filing of the plan;1 in most other jurisdictions, an income deduction order is eventually issued to the debtor’s employer, sometimes as late as at confirmation. Under any arrangement, notwithstanding that the debtor is not anxious to broadcast filing Chapter 13, the debtor’s employer will almost always learn of the Chapter 13 case.

[2]

Debtors are understandably concerned about the impact on employment of filing Chapter 13 and of the income deduction order. It is still true that some employers do not understand Chapter 13 and are reluctant to comply or are downright hostile to the debtor’s efforts at rehabilitation.

[3]

Experienced debtors’ lawyers comfort the debtor’s fears of loss of employment and maximize the likelihood of success in Chapter 13 cases by making an appropriate contact with the employer before the employer finds out about the case through receipt of an income deduction order.2 An employer’s intentional or accidental failure to honor an income deduction order can seriously jeopardize confirmation or consummation of a plan.3 A hostile employer who punishes a debtor for filing a Chapter 13 case may violate the antidiscrimination provisions of 11 U.S.C. § 525 and risks sanctions or damages.4

[4]

The debtor remains ultimately responsible to commence payments within 30 days even if an income deduction order is issued to an employer. If the plan payment doesn’t show on the paycheck stub, the debtor may need to go talk to the folks in payroll and find out what is wrong. The debtor must know to make payments directly to the trustee until a problem with a payroll deduction is straightened out. In egregious situations—for example, where an employer refuses to make deductions or fails to remit deductions to the trustee—counsel may have to help, first by letter or call to the employer and then by motion for contempt or other sanction.5


 

1  See § 248.1 [ Order to Debtor’s Employer ] § 125.1  Order to Debtor’s Employer.

 

2  See § 25.2 [ Explaining Chapter 13 to an Employer ] § 27.2  Explaining Chapter 13 to an Employer for explaining Chapter 13 to an employer.

 

3  See § 251.1 [ Failure to Deduct or Remit ] § 125.6  Failure to Deduct or Remit for discussion of what to do if an employer fails to honor an income deduction order.

 

4  See §§ 73.1 [ Termination of Services to Debtor and Discrimination against Debtor ] § 58.13  Termination of Services to Debtor and Discrimination against Debtor and 251.1 [ Failure to Deduct or Remit ] § 125.6  Failure to Deduct or Remit.

 

5  See § 251.1 [ Failure to Deduct or Remit ] § 125.6  Failure to Deduct or Remit.