Cite as: Keith M. Lundin, Lundin On Chapter 13, § 53.9, at ¶ ____, LundinOnChapter13.com (last visited __________).
The Chapter 13 debtor is required by § 1326 to commence making the payments proposed by a plan within 30 days after the plan is filed.1 The Chapter 13 trustee has a statutory duty to ensure that the debtor commences making payments.2
The Code does not tell what the trustee should do to ensure that the debtor commences making timely payments. There is listed as cause for conversion or dismissal in 11 U.S.C. § 1307(c) that the debtor has failed to commence making payments required by § 1326.3 In many jurisdictions, the Chapter 13 trustee ensures compliance with § 1326 by moving for conversion or dismissal if the debtor fails to commence making timely payments. There are many less formal ways in which trustees satisfy this duty, including letters and calls to debtors and counsel when payments required by § 1326 are not received.
The trustee’s duty to ensure that debtors commence making timely payments is an argument in support of issuing income deduction orders in all Chapter 13 cases before confirmation.4 An order to the debtor’s employer requiring deduction of the plan payment and remittance to the trustee is about the best “ensurance” of payment available in a Chapter 13 case.
In one of the few cases discussing the trustee’s duty to ensure that debtors commence making timely payments, the debtor was employed by the United States Postal Service and the bankruptcy court issued an income deduction order to the Postal Service to fund the confirmed plan. Pursuant to statute and regulations, the Postal Service imposed a $50 administrative fee on the income deduction order.5 The Chapter 13 trustee brought suit to stop the Postal Service from imposing the fee. The District Court for the Eastern District of Virginia held that the Chapter 13 trustee had standing to challenge the $50 fee based in part on the Chapter 13 trustee’s duty to ensure that Chapter 13 debtors commenced making timely payments pursuant to § 1302(b)(5).6
1 11 U.S.C. § 1326. See § 44.1 First Test of Debtor’s Good Intentions, § 44.2 Timing and Form of Payment, § 44.3 Employer Problems, § 44.4 Consequences of Failure to Commence Payments, § 44.5 Return of Payments to Debtor, § 44.6 Preconfirmation Payments after BAPCPA and § 44.7 Disposition of Preconfirmation Payments after BAPCPA.
2 11 U.S.C. § 1302(b)(5).
3 See § 312.1 [ Cause for Conversion ] § 141.3 Cause for Conversion.
4 11 U.S.C. § 1325(c) authorizes income deduction orders “[a]fter confirmation.” Many courts issue such orders as soon as a plan is filed. See § 248.1 [ Order to Debtor’s Employer ] § 125.1 Order to Debtor’s Employer.
5 See 5 U.S.C. § 5520a. See discussion of fees on income deduction orders in § 249.1 [ Can Employer Charge a Fee? ] § 125.2 Can Employer Charge a Fee?.
6 United States v. Santoro, 208 B.R. 645 (E.D. Va. 1997). See § 249.1 [ Can Employer Charge a Fee? ] § 125.2 Can Employer Charge a Fee?.