I filed for bankruptcy, now where’s my *?!*%$# mortgage statements

Let’s imagine you own a home, but have just filed for bankruptcy because of astronomical credit card or medical debts that got out of control. But you were always sure to pay the mortgage first each month (a smart move, by the way) so you would be sure of a roof over your head.

Now its the first of the month after you filed your bankruptcy case, and you notice that although you are ready to make the mortgage payment again, apparently you bank isn’t. They haven’t sent you a statement. What’s going on here?

Well, first off, it doesn’t mean you got a free house — bankruptcy just doesn’t work the same way with secured debts like a mortgage or car loan as it does with unsecured credit card bills. But you probably guessed that already, and you want to make the payment, after all.

It also doesn’t mean that foreclosure and eviction is imminent, either. While you are in bankruptcy, lenders have to go to the bankruptcy judge for permission to start a foreclosure, and they can’t do that without letting your bankruptcy attorney know about it.

According to the lender’s way of thinking, statements are cut off when you file because they don’t want to be seen as sending you a bill for a debt that you do intend to discharge, therefore violating the automatic stay which protects debtors from harassment while their cases are pending in the bankruptcy court.

Of course, if you do want to pay the bill, and you aren’t planning to discharge the mortgage, the lack of a statement can be annoying and inconvenient. It shouldn’t have to be. In fact, if you live in Massachusetts, there is a bankruptcy court rule that allows lenders to send out routine statements without fear of retaliation. it might be a good idea to remind the bank of this. In most cases, a phone call to the lender should take care of the problem (if you can get through to a live person, but that’s another story).

And watch out for banks who have a more devious motive for now sending out statements: to hope you “forget” about the account and fall behind, or to try to pressure you into signing a reaffirmation agreement, which often isn’t necessary if you are completely caught up on the mortgage.

 

By Doug Beaton

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