Monthly Statements in Chapter 13 Cases

16 Dec Monthly Statements in Chapter 13 Cases

img_7147Many of my Chapter 13 clients find that once they file their case, their mortgage and car lenders stop sending them monthly statements, stop sending payment coupon books, and stop allowing them to make on-line payments. This obviously makes it harder for them to make their payments on time. Why do lenders do this, and what can you do about it?

Lenders don’t like to send monthly statements, coupon books and let you make payments on-line because they’re worried about the Automatic Stay. The Automatic Stay under § 362 of the Bankruptcy Code, prohibits creditors from taking any action that could be considered an attempt to collect a debt from you or from any of your assets. So sending a bill that contains a Past Due amount, or showing you a screen that reflects a Balance Due, could be considered an attempt to collect a debt, and potentially subject them to having to pay damages.

“But I want them to send me my monthly statement!” you say. Even where you send a request that they resume sending statements or letting you pay on-line, most lenders still won’t do so; their lawyers say that the risk outweighs what some (or even most) of their borrowers would like. So what can you do?

Here in Maryland, when I served on the committee that rewrote our form Chapter 13 Plan, I was able to get a Local Rule passed that allowed mortgage and car loan lenders whose claims were being paid through a Chapter 13 Plan to send statements without violating the automatic stay. Did it work? No. These lenders, most of whom are national, didn’t want to have one standard for Maryland and another for other states. They continued to worry about the Automatic Stay.

Better is the approach taken in the December 8, 2016 Eastern District of Massachusetts Bankruptcy Court’s decision in In re Perry. In Perry, BLN Member Nicholas Ortiz came up with the idea of including in the Chapter 13 Plan specific language requiring that the mortgage lender send monthly statements. And once a Chapter 13 Plan is approved by the Court, both the Bankruptcy Code and the Supreme Court have said that it is binding on all parties. The Court, in interpreting Mr. Ortiz’ language, said, “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.” It also noted that sending these statements under the circumstances presented did not violate the Automatic Stay.

Over the coming months, I anticipate that more and more Chapter 13 Plans will find similar language appearing in them, which will help our clients to better complete their Chapter 13 cases.

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Brett Weiss, a senior partner at Chung & Press, LLC, represents people and businesses in all phases of bankruptcy. He has experience in complex individual Chapter 7, Chapter 11 and Chapter 13 bankruptcy cases, and in Chapter 11 small business restructuring and reorganization. Mr. Weiss lectures nationally on bankruptcy issues. He has testified before the Federal Bankruptcy Rules Committee, the Consumer Financial Protection Bureau, and has twice testified before Congress on bankruptcy and credit issues. Brett Weiss is the co-author of Chapter 11 for Individual Debtors, and has written Not Dead Yet: Bankruptcy After BAPCPA, for the Maryland Bar Journal, as well as hundreds of blogs for the Bankruptcy Law Network. With his law partner, he recorded a 13-hour basic bankruptcy training series, and leads intensive three-day Chapter 11 training boot camps. Mr. Weiss has received international media attention in connection with his work. He was interviewed by Barbara Walters on The View, has appeared on the Today Show, Good Morning America, ABC News with Peter Jennings, the Montel Williams Show, National Public Radio, AARP-TV, the BBC World Service, German state television, and numerous local radio and television programs, and been quoted in Money magazine, The Washington Post and The Baltimore Sun, among others. Brett Weiss is the Maryland State Chair for the National Association of Consumer Bankruptcy Attorneys, a founding member of the Bankruptcy Law Network, on the board of the Maryland State Bar Consumer Bankruptcy Council, and a member of the American Bankruptcy Institute, the Bankruptcy Bar Association of Maryland, and the Civil Justice Network. He has been recognized as a “Super Lawyer” every year since 2007 for Maryland and the District of Columbia, and in 2011 received the Distinguished Service Award from the National Association of Consumer Bankruptcy Attorneys for his work on behalf of consumers across the country. Mr. Weiss is admitted to practice before Maryland and District of Columbia federal and state courts, the United States Courts of Appeals for the DC, Fourth and Eighth Circuits, The United States Tax Court, and the Supreme Court of the United States, and has been practicing law since 1983.
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