- The court issues the wage order and sends the document to the debtor's employer. The order tells the employer how much to withhold and to what address to send the money. The employer transfers the money to the bankruptcy trustee, and the trustee handles disbursements to creditors on the plan. The amount due under the plan over the next year spreads evenly over the debtor's wage schedule. For example, if the plan payment is $100 each month, the total for a year is $1,200. If the debtor is paid weekly, the weekly deduction amount is $1,200 divided by 52, or $23.08.
- A debtor can file an objection to an automatic wage order when filing the bankruptcy petition. She must indicate why the wage order is unreasonable or not feasible in her situation on the objection, and the judge decides whether to issue an order for the case.
The debtor can contact her attorney if she encounters problems with the wage order, such as the employer failing to send timely payments. The attorney can ask the court to terminate the order.
- The debtor is responsible for making sure the payments reach the trustee on time, even with a standing wage order, and must make payments to the trustee if the employer fails to forward the money. The court makes a new order if the debtor changes employers, but the debtor must pay the trustee until the new employer receives the order.
Persons who do not receive wages from an employer, such as a self-employed person, cannot get a wage order. Some court districts allow debtors without an employer to sign up for an automatic withdrawal of the plan money from a bank account.
- An employer cannot take action against a debtor because of a Chapter 13 wage order. Federal laws prohibit employers from discriminating against debtors who filed bankruptcy.
Federal and state laws limit how much money a creditor can take on a wage garnishment. The amount withheld for a Chapter 13 repayment plan is typically not limited by law because filing bankruptcy is voluntary on the debtor's part.