Chapter 13 Plan Payments and Payroll Control

A debtor must commence making plan payments within 30 days of filing a plan. The first plan payment should be made directly by the debtor. From that point forward, the debtor should be paying through payroll control. This is where the funds are deducted directly out of a paycheck and submitted to the Trustee. My experience has shown that debtors who are on payroll control have a much greater success rate than debtors who make direct payments. Obviously, the advantage to payroll control is that the money is automatically deducted, provided the debtor remains employed. On the other hand, with voluntary payments, the debtor can elect to pay other monthly expenditures in lieu of making the required Chapter 13 plan payment.

In some cases, payroll control is not an option. This would be cases where the debtor is self-employed, receiving social security or other non-wage income. In those cases, it is extremely important to stress that the debtor keep a record of all trustee payments and that those payments be made timely. If not, the trustee and/or a creditor will bring a motion to dismiss the case.

Importantly, do not assume that just because you are on payroll control, your payments are being made timely to your trustee. Review carefully your paycheck stub to note the deduction, and then take an extra step to ensure that your payroll department is forwarding those deductions to the trustee. Many a case has been dismissed because the payroll department did not forward to the trustee the deductions that were taken. It still remains the debtor’s duty to make sure that payments are being made.

Lastly, why not get off to a great start and have an additional payment placed with your trustee. That way, you would have a slight cushion to offset either a payroll error or a debtor error.