Bankruptcy Chapter 13 Wage Order Directives and the Feasibility Issue
The primary complaint of Chapter 13 debtors under wage order is the fact that wage order directives are not activated quickly enough to keep them current with the Trustee when payment increases.
In one particular case, the debtor was switching employers in the midst of plan modification to lower the plan payment significantly. The Trustee’s office can not terminate the Wage order. The wage order can only be terminated by the employer after debtor is no longer employee. In this case, the decreased wage order was not recognized at the Trustee’s office until a new wage order was provided by debtor for new employer. This process takes about 2-3 payroll cycles and is sometimes not started until after the plan modification hearing. So this Chapter 13 debtor went from being overpaid with Trustee’s office in November 2006 to delinquent in January 2007. Obviously, this has causes the Chapter 13 debtor to become concerned that he suddenly owes almost a $1K to be current under new plan payment schedule.
This issue arises under Chapter 13 new law reform case when several payment changes are made the payment scheme of Chapter 13 plan.
Many people that file Chapter 13 bankruptcy are doing so due to loss of income. When they file, they are still looking for a job, so on their schedules we list prospective income as part of their income. However, the Trustee wants something more concrete to show that the Debtors will be able to make their trustee payment, mortgage payment, and any other necessary expenses in order to survive.
Many Debtors don’t understand why the Trustee cares as long as they are current. To some extent I tend to agree with the Debtors who have this thought, but there are some good reasons the Trustee cares. It is part of the Trustee’s job to make sure the Debtors are going to be able to make the 3-5 years in bankruptcy. If the Debtors are only able to make their Trustee payment, but not their mortgage payment or car payment, they will still lose their house or car. Also, when you haven’t made a mortgage payment for 3 or 4 months, it is easier to make the Trustee payment for the first month or two. It is after that the problems tend to arise for Debtors if they cannot afford their Trustee payment and other bills. Debtors will get behind on their utilities, let their insurance lapse, or miss a payment or two to their mortgage company or car creditor. These are things the Trustee wants to ensure don’t happen.
One way the Trustee tries to ensure such events from happening is to make sure Debtors can afford their plan payment as well as all their other necessary bills. So, when the Trustee objects to a Debtors plan based on feasibility, it is not to be mean or because they don’t want the Debtor in the bankruptcy. It is quite the opposite, they want to make sure the Debtor will be able to finish the bankruptcy successfully and not have their case dismissed a few months later for failure to make their Trustee payment, or for them to lose their house or car because they were more concerned with making the Trustee payment then the mortgage or car payment.
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