What Happens When My Mortgage Company Goes Bankrupt?

16 Sep What Happens When My Mortgage Company Goes Bankrupt?

In these days of old-line financial powerhouses filing for bankruptcy and continuing questions about the economic stability of banks and mortgage companies, we are often asked what happens if your mortgage company goes bankrupt?

The answer is actually pretty simple and straightforward.

You pretty much don’t do anything differently than you’re doing now.

You still need to make your monthly payments. You still need to keep your property insured and pay the property taxes (if you aren’t paying the insurance and taxes as part of an escrow).

Why should you do these things if your mortgage company files bankruptcy? Because if you don’t, the mortgage company, acting through a trustee or receiver (in a Chapter 7 liquidation), or as as a debtor-in-possession (in a Chapter 11 reorganization) will still file for foreclosure against your property. The mortgage company is still entitled to receive payment; the bankruptcy filing doesn’t change that, regardless of whether it’s a Chapter 7 or a Chapter 11.

You may eventually receive a notice that your payments need to be sent to a different address or to a different company. Be sure to check this out; a phone call (not to the number on the notice) to verify that your account has actually been transferred is always smart.

From the mortgage company’s perspective, of course, things look entirely different. In a Chapter 7, a Trustee typically will operate the business until a buyer or servicer for the accounts can be found. In a Chapter 11, there are a host of issues related to continuing to operate the company, obtain new financing, etc. But from your perspective, it’s probably going to be business as usual.

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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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