What is an income deduction order in Chapter 13 Bankruptcy?

An income deduction order in Chapter 13 Bankruptcy is a court order that requires employers to deduct money from an employee’s paycheck for the purpose of repaying a debt. This order is typically sought by the debtor’s creditor, who then submits the order to the bankruptcy court. Once approved by the court, the employer is then directed to deduct a certain amount of money from the debtor’s paycheck each pay period and send the money to the court. The money is then distributed to the creditor according to the terms of the repayment plan established in the Chapter 13 Bankruptcy. Income deduction orders can also be used to make payments on outstanding debts, such as medical bills or other unsecured debts. The amount of money deducted is determined by the court and is based on the debtor’s income and expenses. This deduction can last for the duration of the repayment plan, which is typically three to five years. While an income deduction order can provide debtors with a way to pay off their debts, it can also be a burden. It can be disruptive to have a portion of one’s paycheck taken out each pay period, especially for those who are living paycheck to paycheck. Additionally, some employers may be hesitant to submit to an income deduction order due to the extra cost and paperwork involved with processing the deductions.

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What is an income deduction order in Chapter 13 Bankruptcy?

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