Income Deduction Orders in Bankruptcy

At the confirmation hearing, if it is determined that you have a regular job with a steady income, the judge may order an ‘income deduction.’ This means your monthly payments for the bankruptcy plan will be taken automatically from your wages and sent to the bankruptcy court to be distributed to your creditors.

Automatic Order

In many districts, this action is automatic at the confirmation hearing, or possibly even earlier. If you refuse to comply with this order, the judge can deny your plan. Not all districts enforce the income deduction order. Some courts leave it up to the filer if they would like one. Those with income deduction orders have a higher success rate in completing their Chapter 13 plan.

They are impossible to enforce if you are:

• Self-employed
• Using pension benefits to make your payments
• Using public benefits like Social Security to fund your plan

If you have an income deduction order in place, your employer is generally prohibited from taking other deductions from your paycheck. This includes wage attachments, garnishments, and voluntary payroll deductions. Your employer is also prohibited from discriminating against you for filing bankruptcy. If you change jobs, you will need to inform your trustee so arrangements can be made for a new order.

If you have more questions about the income deduction order or would like to find out how you can get financial relief, contact a Dallas bankruptcy attorney.