Chapter 13 cases are three to five year payment plans. Creditors receive a monthly payment based on a debtor’s ability to pay, the type of debts they owe, and the amount of unprotected property they own.
But how does one make the payment? Who do you pay?
Chapter 13 payments are paid to the Chapter 13 Trustee, typically an attorney appointed to oversee the bankruptcy case. In Nebraska that person is Kathleen A. Laughlin.
HOW DO YOU PAY THE CHAPTER 13 TRUSTEE?
There are only two ways to pay the Trustee:
- Money Order or Cashier’s Check.
- Garnishment of paycheck.
No other payment methods are allowed. (Read this.)
What about payment in cash? Are personal checks allowed? What about paying via a debit card? Can you pay online? Can you set up an automatic payment? What about BillPay services?
None of those payment methods are allowed. And, to be honest, I just don’t understand.
WHY CAN’T AUTOMATIC PAYMENTS BE SET UP?
I wish I understood the answer to that question. I really see no reason why an automatic payment cannot be set up. In fact, the TFS company has established a program to facilitate automatic payments in chapter 13 cases. Many chapter 13 trustees around the country use TFS, including Iowa.
What I do know is that automatic payments work. Clients who have the payment deducted from their paycheck complete their payment plans at a much higher percentage than those who do not.
But not everyone can have a payroll deduction, and that is a real problem. Many clients are self-employed. Many are underemployed and they do not earn enough from one job to make the payment. Others have jobs where their employers look dimly on payroll garnishments thus causing employment issues.
SUMMARY
Working in our nation’s bankruptcy system for nearly 30 years, I can say that Nebraska has just about the best court system in the country. Really, there is something special about Nebraska’s system. Maybe it is because we are small population state and we just know each other better and cut through the red tape. Attorneys just don’t appreciate how great Nebraska’s bankruptcy judges and trustees are until they practice elsewhere.
But the lack of automatic payments in Chapter 13 drives me nuts. Come on Nebraska, we can do better than this! Let’s automate!