Friday, July 5, 2013

How are Chapter 13 Payments made in Oregon?

When someone files for Chapter 13 bankruptcy protection in Oregon there is a monthly payment that is made to a bankruptcy Trustee.  One of the biggest jobs for a Chapter 13 Trustee is to distribute this money to the creditors in the case.  The first payment from the Debtor is due 30 days after the case is filed.

In Oregon, the Courts now require that payments are made by a "wage order".  A wage order is basically a directive to the debtor's employer to withhold the payments from the debtor's paychecks and forward the funds on to the Trustee.  It is similar to a garnishment - a court order to withhold funds from an employee and forward them to a 3rd party.

A debtor can ask the Trustee to waive the wage order requirement. The most common reason for the wage order to be waived is if the debtor is self-employed.  If the debtor is employed it is very difficult to get the wage order waived.  However, if the debtor can show that if their employer knew that they filed bankruptcy it would adversely affect their employment a wage order may be waived.  It is not enough that the debtor be embarrassed about the employer knowing - they must prove that it could actually affect their job. A common example is if the debtor/employee handles money for the company, or the debtor/employee was recently hired.

If the wage order requirement is waved, then the Debtor will mail in monthly payments to the Trustee each month by money order or cashier's check.

Wage orders used to be voluntary in Oregon Chapter 13 cases.   But, statistics showed that debtors with wage orders had a much better chance of completing their case than those who were mailing them in.

Many of my clients really like having the wage order in place because they don't have to worry about missing a payment. They simply need to keep an eye on their paycheck to make sure the chapter 13 payments are coming out of their checks.