There’s A New Way To Have Chapter 13 Payroll Orders Entered

New Local Form 25

Effective June 12, 2015, there is a new method to have chapter 13 payroll control orders entered before the court. The new system completely streamlines the process of getting the order entered quickly and effectively. The clerk’s office in the Northern District of Illinois came up with a new form, local form number 25 entitled “order to employer to pay the trustee.”  This new form is a fillable order that can be easily amended and changed based upon which chapter 13 trustee is assigned to the case. For example, if the trustee is Glenn Stearns, then all of the information including the mail to address is indicated with Glenn Stearns. If the trustee is Marilyn Marshall or Tom Vaughn, the form changes to accommodate those trustees and their mailing addresses. The biggest benefit to this new local form number 25 is the method in which it is presented or submitted to the court.

The Old Method

Prior to this new form, debtors’ counsel would prepare a payroll control order which would have to be submitted to the specific trustee. That trustee in the ordinary course would present that proposed order to the judge. The judge would then sign the order and it would be entered on the docket. This process of submitting the order to the trustee and then having the trustee submit it to the judge and then waiting for a signature and docketing, could last anywhere from 1 to 4 weeks. This put the burden on the debtor to make that first plan payment on his or her own prior to the payroll control order kicking in. Even in the most expedient cases, there was always a one-week to two-week gap of time from when the case was filed until the order was entered on the docket. When you factor in the additional time that the trustee takes to send it to the employer with a cover letter, you can see several weeks or more go by before the employer actually became aware of the order. The new system changes all that for the better.

The New Method

Under the new system and the use of this local form number 25, the debtor’s attorney or the trustee can immediately upload the fillable form after the cases is filed onto the docket. The very next business day, the judge will review the order and sign it. The very next day the signed order will appear on the docket for everyone to utilize. This basically takes a several week process and turns it into a several day process. For example, if the debtor files a case on a Monday and the proposed order is submitted on that same day, the judge will typically sign it on a Tuesday and it will hit the electronic case filing indicators the following day which would be Wednesday. On that Wednesday, debtor’s counsel could technically download that order and submit it to the payroll department for their client. This means that within three days of filing, the payroll control order is signed and in the hands of the payroll department of the debtor.

Help For Debtors In Chapter 13

This new method of submitting the payroll control order will help debtors in Chapter 13 tremendously. Many debtors fall behind on their plan payments wrongfully believing that every deduction is going to be made timely and then it’s going to be made by payroll control. As we’ve seen in the past, the time gap between the filing of the case and the actual deduction of the debtor’s pay can be weeks or more. Depending upon the debtor to make that first plan payment on his or her own prior to payroll control kicking in is a difficult thing for a debtor to do. Firstly, the debtor has the mindset that their on payroll control and thus, they are not to make a payment on their own because it’s going to come out of their check. The debtor doesn’t understand the time factor required and the need to be current with a plan payment made within 30 days of filing. The debtor is also of the mindset to pay for his or her necessities without having to submit additional funds to a chapter 13 trustee when they believe that they are on payroll control anyway. These two factors have led debtors to fall behind other cases and thus, their case is not confirmed. This new proposed order for the employer to pay the trustee through payroll control should end 90% of that problem.

Expectations Moving Forward

If I were a debtor, I would expect that my payroll control order would start to become effective and deductions would start by my next pay period after filing. This time gap the debtors have become accustomed to should no longer exist under this new system. This new system will benefit all parties involved. The debtor will more likely than not be current which will allow for a higher percentage of confirmable plans. The creditors will start to receive adequate protection payments where in the past they may not have. Debtors counsel will see more money being paid to the trustee which can be allocated towards attorney’s fees. Basically, this new local form number 25 and its method of getting the payroll control order entered is going to be a great thing for everybody involved in a chapter 13 bankruptcy case.

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