You know that in a Chapter 13 case you have to pay into a Chapter 13 Plan, usually for a period between 36 and 60 months. The amount of your payment is based on your disposable income. How are these payments made to the Chapter 13 Trustee? In the great majority of cases, they are made by check payable to the Trustee or by an employer deduction order (or “EDO”) (sometimes called “income deduction orders” or “payroll deduction orders“). An EDO means that your employer is required, by court order, to send a portion of your paycheck to the Trustee that is equivalent to your monthly Plan payment. You Plan payment will be divided by the number of paychecks you receive in a month. In many jurisdictions, including our district in Georgia, EDO’s are required when the debtor is employed outside the home (unless self-employed).
In some ways, an EDO is similar to a garnishment in that the employer is ordered by the Court to deduct the funds from the employee’s paycheck and send the payments to the Trustee. However, EDO’s are not all bad. They normally ensure that the Plan payments are timely made by the employer and they reduce the chances the debtor will be late in making payments or tempted to use the money now and make up for it later. This can lead to a dismissal of the case. An EDO probably will make the debtors get used to a budget, especially if they were accustomed to using the first check of the month to pay a large expense like house or rent payments. However, as Chapter 13 usually requires some strict budgeting anyway, this should work itself out over time. Since Bankruptcy lawyers will usually work on the plan before or just after the case is filed, you should know about how much your plan payments are going to be so you can start adjusting.