Many potential bankruptcy clients hesitate to file even when reality demands it because they don’t want their employer to find out about the bankruptcy. The idea of having the court order the employer to deduct the chapter 13 payment directly out of the person’s paycheck is just flat out repulsive to some. The truth is that the employment deduction order is not required in every Chapter 13 in the Northern District of Georgia.
For example, you are not required to have the employment deduction order if doing so might prevent you from being promoted in the future. In this type of situation, the Chapter 13 trustee will demand that you agree to one year of strict compliance in lieu of the employment deduction order (also known as and EDO).
Strict Compliance is Worse than an EDO
Strict compliance means that if you miss any payment for any reason, your Chapter 13 is dismissed. You receive no warning at all. In contrast, when you have an EDO, the trustee will not dismiss your case without filing a Motion to Dismiss. This motion gives you 30 days to figure out what has gone wrong with your payment and it gives you time to come up with a plan to catch it up.
If you work for a small company, I can understand why you would object to an employment deduction order. However, it is important to note that bankruptcy is a matter of public record. As a consequence, if your employer really wanted to find out, it would not take that much effort to do so.
When a person works for a large company, it is almost always best to have an employment deduction order. The EDOs are mailed to payroll departments. Most large companies have payroll departments in other parts of the country or at a different location than where most of the company work gets done.
Reason Why You Should Want to have an EDO
The number one reason why you should want an EDO is that your Chapter 13 is much more likely to succeed if your payment is automatically deducted every time you get paid. The odds of your employer firing you because of an employment deduction order are close to zero. Even though Georgia is an “at-will state” (which means that they can fire you for almost any reason), most employers with a shred of common sense will never fire someone just because of an EDO. Firing a person because they filed bankruptcy would be an invitation for an expensive lawsuit. Even if the employer prevailed on the lawsuit, the legal bill for defending it would be enormous.
In addition, if every employer tried to fire everyone who has filed bankruptcy, that would rule out a significant portion of potential workers in most industries.
Any questions or concerns you have about employment deduction orders should be addressed by your bankruptcy attorney during your first meeting.
3. How much does it cost to file?
4. How do I stop a garnishment?