March 15, 2017

Background:

  • Most banks will no longer send monthly statements to the debtors when debtors are in bankruptcy.
  • Debtors must call or contact the bank if they want to find out the monthly amount owed.
  • Creditors/banks must notify the debtors only if there is a change in the monthly payment.
  • Debtor filed a Chapter 13 Plan and added in the Plan that the creditor was to continue with monthly statements to the debtors.
  • HSBC objected on the basis that it would be a violation of the automatic stay and create a logistically burden to the bank.
  • HSBC stated that adding the clause requiring statements, the Plan was unconfirmable.

Court Decision

  • Appropriate manner to protect Chapter 13 debtors’ cure rights and mitigate the threat of defaults was to provide statements.
  • As far as the bank’s assertion that it would create a logically burden, the Court ruled that the burden to HSBC harm in finding a way to solve this does not outweigh the harm to the Debtors if a monthly statement was not issued.
  • HSBC was required to continue to provide monthly mortgage statements.

I was pleased to see the Court rule in favor of providing monthly statements to debtors in bankruptcy monthly statements.   When a statement is not received, debtors may run a high risk of default.    If the banks were providing statements in the past and the loan is being paid, they should send monthly mortgage statements if the Debtors add that to their Plan.