Many of my friends find that once they file Chapter 13 bankruptcy, lenders stop sending them monthly statements. Mortgage and car lenders don’t send payment coupon books and monthly statements to debtors. Some lenders don’t even allow debtors to make online payments after filing bankruptcy. Wondering why lenders do this and what can you do if lenders take the same step against you?
Well, lenders have a valid reason for doing this. Let us know about it and a possible way to deal with this problem in the next section of this article.
Most lenders don’t prefer to send monthly bills and coupon books after you have filed bankruptcy due to the Automatic Stay. This is the same reason why lenders don’t allow you to make online payments in bankruptcy.
In simple words, the Automatic Stay is an injunction granted by the court in bankruptcy. The Automatic Stay prohibits lenders from taking any step for collecting debts or assets from debtors. If a lender sends a bill that shows the past due amount, then it could be considered as an attempt to collect a debt. Lenders are not ready to take that risk since if they are found guilty of violating automatic stay, they would have to pay hefty penalties later.
You can request your lender to send you monthly statements or allow you to make online payments. But most lenders will not grant your request. The risk is too much for them. So what’s the other possible option for you?
Call your bankruptcy attorney quickly. Ask your attorney to include a specific language in the Chapter 13 bankruptcy plan that requires mortgage and auto loan lenders to send monthly statements. When the court approves the Chapter 13 bankruptcy plan (or the reorganization plan), it’s legally binding for both the parties.
The bankruptcy says, “Requiring [lenders] to send monthly statements is not a right but an obligation, and one that is inextricably bound to a debtor’s ability to cure mortgage defaults, one of the primary objectives of chapter 13.” The bankruptcy court also says that sending monthly statements in this scenario is not an Automatic Stay violation.
The trick is to include the specific language in the original Chapter 13 bankruptcy plan itself. Once my friend’s attorney rewrote the entire Chapter 13 bankruptcy plan, and got a local rule passed that permitted mortgage and auto loan lenders to send monthly statements without breaking the bankruptcy law. But it didn’t work. Lenders were still not convinced. They were still afraid and didn’t send monthly statements to my friend. That’s why I said it’s better to include the specific language in the original reorganization plan itself. It would save you a lot of time and money.
Bankruptcy doesn’t end all the problems. There are many things you have to do after filing Chapter 13 bankruptcy. I just hope debtors start including the similar language requiring that the lender send monthly bills. This will help debtors to complete the Chapter 13 bankruptcy plan smoothly.