Why Do I Still Get Billed For My House I Surrendered In Bankruptcy?

Lately, most people are surrendering their real estate in Chapter 7 Bankruptcy Proceedings.  This is because there is usually little if any equity left in the property.  In fact, in many cases, surrendering the property is recommended in light of future interest rate adjustments which will increase monthly payments, negative equity, and the fact that is generally much cheaper to rent now rather than own.

But when the property is surrendered, the billing must stop!  Under 11 USC 524, the Bankruptcy code forbids any collection efforts to collect on any debts personally from the debtor.  Since a discharge has been entered, a creditor must wait for payment and is not allowed to send any billing notices, unless you specifically authorize othewise  That is the law. 

However, it seams that lately, real estate lenders are no longer abiding by the bankruptcy discharge injunction.  They continue to send billing statements and upload false information each month to credit bureaus that the debtor still remains personally liable for the debts. 

Just this past week, I had several complaints from former clients and even other debtors that were not my clients, that they are getting harassed by Countrywide, Wells Fargo, and other real estate lenders, who continue to bill them and upload balances are still owed on the credit reports.Im not sure why the sudden change to break the laws. 

While there is an exception to the discharge injunction under 11 USC 524(j) which allows

(j) Subsection (a)(2) does not operate as an injunction against an act by a creditor that is the holder of a secured claim, if–

(1) such creditor retains a security interest in real property that is the principal residence of the debtor;(2) such act is in the ordinary course of business between the creditor and the debtor; and(3) such act is limited to seeking or obtaining periodic payments associated with a valid security interest in lieu of pursuit of in rem relief to enforce the lien.

such an exception certainly would not apply where the debtor surrenders the property since it is no longer the principal residence of the debtor. So what is the bottom line?

The bottom line is that these creditors are engaging in illegal conduct in violation of the Bankruptcy Code.  If you are such a victim to such conduct, contact your attorney immediately.  You may be entitled to damages in seeking relief from the Bankruptcy Court to make sure your creditors abide by the discharge injunction.  Remember, if you did not file bankruptcy, these creditors would surely sue you for breaching the contract. Well, its time now to sue them for breaching the discharge injunction!

Written by Michael Doan   

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