§ 27.2 — Explaining Chapter 13 to an Employer
Revised: March 30, 2009
Debtor’s counsel should assess the impact of filing on the debtor’s employment and consider contacting the debtor’s employer to explain Chapter 13 before the case becomes known through more awkward events like receipt of a payroll deduction order.1
Many employers do not know that Chapter 13 is a healthy way for a troubled employee to get control of financial difficulties. Some employers misinterpret the payroll deduction order as a state court garnishment and actually penalize the debtor.2 A phone call or letter from debtor’s counsel to an employer before filing can set the debtor at ease, facilitate implementation of the payroll deduction order and maximize cooperation with the debtor’s financial rehabilitation.
Some Chapter 13 trustees have (free) employer information pamphlets available for distribution by debtors’ counsel to employers.
Financial difficulties often reflect in poor job performance. Telling an employer that the debtor is taking steps toward financial control can improve the debtor’s prospects from an employer’s perspective. It should be explained to the employer that Chapter 13 will stop all garnishments of the debtor’s wages and will require the debtor to budget and to accept responsibility for payments to creditors. Educated employers are sympathetic toward debtors in Chapter 13 cases and often offer extraordinary cooperation in the form of overtime and time off for court hearings. Experienced debtors’ attorneys report that the personnel or human resources departments at some larger employers are sophisticated in Chapter 13 matters—both to support employees who file and as a referral source for employees who have financial problems.
1 See §§ 248.1 [ Order to Debtor’s Employer ] § 125.1 Order to Debtor’s Employer–252.1 [ Special Deduction Order Problems: Entitlements, Pensions and Government Employers ] § 125.7 Special Deduction Order Problems: Entitlements, Pensions and Government Employers for discussion of income deduction orders.
2 Discrimination by governmental units and by private employers based solely on the filing of a Chapter 13 case is prohibited by 11 U.S.C. § 525. See § 73.1 [ Termination of Services to Debtor and Discrimination against Debtor ] § 58.13 Termination of Services to Debtor and Discrimination against Debtor.