I Filed Bankruptcy And My Mortgage Company Has Stopped Sending Me Statements–What Now? Standing Modification of the Automatic Stay

27 Aug I Filed Bankruptcy And My Mortgage Company Has Stopped Sending Me Statements–What Now? Standing Modification of the Automatic Stay

We all know that the automatic stay serves to stop almost all creditor attempts to collect a debt.  The automatic stay has been discussed extensively on this blog.

But many times, creditors will stop sending monthly mortgage statements because they are under the impression that it violates the automatic stay to continue to send statements.  In the Eastern District of North Carolina, we have resolved this problem by a Standing Modification to the Automatic Stay through Local Rule 4001-1.

Under Local Rule 4001-1(a)(1)(A) (referencing Local Rule 4001-2(a)), in chapter 7 cases, secured creditors may continue to send billing statements or payment coupons or statements of account to debtors if the debtors have indicated in their Statement of Intention that the debtors will retain the collateral by complying with the terms of the contract.  The creditors’ continued mailing of billing statements shall not violate the automatic stay or the discharge injunction.

Similarly, under Local Rule 4001-2(a)(2), a secured creditor may continue to send biling statements, payment coupons or statements of account to the debtors if the debtors’ chapter 13 plan expresses an intent to retain the collateral by complying with the terms of the contract.  We generally list these debts as “direct pay.”  Sending the billing statements will not violate the automatic stay or the discharge injunction under such circumstances.

Furthermore, we often get numerous requests from secured creditors seeking information on the status of insurance coverage for the collateral.  Generally, a debtor is required to keep the collateral insured (and it should be kept insured!).  But, if a creditor is unsure of coverage and just wants to verify insurance coverage, the creditor may contact the debtor for this purpose.  This will not be a violation of the automatic stay.  E.D.N.C. Local Rule 4001-1(a)(4)(i). 

Likewise, if a chapter 13 debtor is continuing to make payments to a secured creditor “outside the “plan” or “direct” to the creditor, if the debtor falls behind on “post-petition (after you filed bankruptcy) payments,” the creditor may contact the debtor regarding the payments in default without this contact violating the automatic stay.  If the creditor chooses to do this, the creditor should politely and professionally remind the debtor that the payment is due and that payment should be sent in as soon as possible.

Finally, our Local Rules address the situation that commonly occurs in chapter 7 cases where a debt is not reaffirmed (for whatever reason) but the debtors continue to make payments on the collateral pursuant to the contract.  In many instances, the creditor will stop sending monthly billing statements.  If that happens and it is the creditor’s normal business practice not to send statements after a chapter 7 discharge on a debt that has not been reaffirmed, then the creditor must provide an address or telephone number or other means by which the debtor may access account information normally provided by billing statements or payment coupons.

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Adrian Lapas, Esq.

I've been practicing bankruptcy law in North Carolina since 1993, and am certified as a specialist in consumer bankruptcy law by the North Carolina State Bar.
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