Missing Monthly Statements after Bankruptcy

Once a bankruptcy case is filed, the provisions of the automatic stay are triggered. The automatic stay of the Bankruptcy Code prohibits, inter alia, “any act to collect, assess, or recover a claim against the debtor that arose before the commencement of [the bankruptcy case.]” See Section 362(a)(6). Many secured creditors and debtor attorneys (and some courts) agree that this means that secured creditors such as mortgage and auto lenders must stop sending monthly statements to the bankruptcy debtor. The lack of a monthly statement, or online access to your account, can create issues when the debtor desires to retain and continue payments on secured property after filing bankruptcy.

Whether periodic statements from a secured creditor violate the automatic stay (or the discharge injunction) has been a long-standing source of confusion to debtors, creditors, and courts. At least one court attempted a “work-around” by implementing a local bankruptcy rule that directs secured creditors to continue sending monthly statements, if these statements were sent prior to the bankruptcy filing and the debtor has indicated a desire to keep the property. See Local Rules of the United States Bankruptcy Court for the District of Kansas, D. Kan. LBR, Standing Order 08-4 (2013). Other courts have modified the automatic stay through court order, when requested. See e.g., In re Freeman, Case no. 3:05-bk-06791 (Bankr.N.D.W.V., 2006). Some west coast bankruptcy courts have found no violation at all if there is evidence that the debtor intends to keep the property. See Garske v. Arcadia Financial, Ltd. (In re: Garske), 287 B.R. 537 (9th Cir. B.A.P. 2002); See also Ramirez v. General Motors Acceptance Corporation (In re Ramirez), 273 B.R. 620 (Bankr. C.D. Cal. 2002).

The Dodd-Frank Wall Street Reform and Consumer Protection Act imposed new obligations on mortgage creditors and servicers and assigned oversight and enforcement to the Consumer Financial Protection Bureau (CFPB). In turn, the CFPB issued policies and procedures including a rule directing mortgage companies or servicers to send periodic billing statements to the borrower, commonly called the “periodic statement rule.” Statements under this rule must be sent each billing cycle (usually monthly) and must contain certain billing information.

However, the CFPB is just as confused as the rest of the legal world when it comes to creditor statements send to debtors in bankruptcy. The CFPB issued a Bulletin and interim final rule stating that it was studying the interactions between the periodic statement rule and bankruptcy law. In the meantime, bankruptcy debtors are exempt from the periodic statement rule.

A debtor in bankruptcy may request a periodic statement from a creditor, but the creditor may also refuse. Private agreements to modify the automatic stay have always been held as “inherently suspect” by bankruptcy courts. Additionally, the automatic stay not only protects the individual debtor from harassment, but also, for instance, extends to protect property of the bankruptcy estate. See Section 362(a)(3). Consequently, it is not only the debtor’s interest at issue when the automatic stay is waived or modified, and a creditor may run afoul of the bankruptcy court even when the debtor consents.

One “old school” trick is to photocopy a pre-petition statement and send the copy along with your monthly payment. Secured creditors nearly always resume periodic statements after a debt is reaffirmed, so the debtor usually only has to send photocopies for a couple of months.