How to Get a Lender to Unfreeze a Mortgage After Filing for Bankruptcy
My question involves bankruptcy in the state of: California. Question is in regard to a filing for credit card debt only. A bank creditor not listed in the filing has locked a mortgage loan subaccount preventing online access and has suspended automated monthly loan payments. Account is in good standing and loan payments are current (but being made manually at this point). Discharge of this mortgage loan debt is not being sought as part of this filing and there is no other debt – credit card or otherwise – associated with this particular bank. What justification does the bank have for locking the loan account under these circumstances and what recourse is there for getting it unlocked and regaining online access to it? I spoke to an agent at the bank who implied it might not be possible and said something about having to get an escrow officer involved, which I don’t understand. Thank you in advance . . .
Re: Why Did Bank Lock Mortgage Loan Account and How Do I Get It Unlocked
You understand that you cannot choose the debts to file for bankruptcy, right? ALL your debts are subject to the bankruptcy proceeding and the automatic stay that results when you file the bankruptcy petition. If you don’t want to get the mortgage discharged then you’d seek to reaffirm that debt in the bankruptcy. Have you gotten the reaffirmation done? If not, then the automatic stay here is almost certainly your problem. Do you have a lawyer for your bankruptcy? If not, maybe you should. I’m not sure you have a good enough handle on how this works to do it pro se.
Re: Why Did Bank Lock Mortgage Loan Account and How Do I Get It Unlocked
Thank you for the reply. Yes, I am being represented by a bankruptcy attorney, but did not understand that all debts are effectively included; thank you for the clarification. When I became aware I was locked out of the account, I contacted my attorney who said he could send them some kind of letter that would 'reassure' them and presumably allow the stay to be lifted. (I assume that is the reaffirmation you are referring to?) But when I spoke to the bank, I was told that such letter would not do any good and that the stay would remain in effect until the case was discharged, regardless. Thus far my attorney has offered nothing further in the way of help/guidance, so am at a loss as to how to proceed. Any additional thoughts would be much appreciated.
Re: Why Did Bank Lock Mortgage Loan Account and How Do I Get It Unlocked
Understand there's no need for the word "effectively." Bankruptcy is not selective.
REAFFIRMATION and LIFTING THE STAY are two different things. Understand that the trustee represents the creditors you're stiffing NOT you. You do not get to have a preference for one creditor over another. As the loan officer pointed out, you can't reaffirm until it's been discharged. The stay is not going to get lifted early unless the bank makes a good argument that there's really no equity there and no hope that the loan will be resolved in the bankruptcy process.
Re: Why Did Bank Lock Mortgage Loan Account and How Do I Get It Unlocked
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flyingron
As the loan officer pointed out, you can't reaffirm until it's been discharged.
That’s not what the loan officer evidently told the OP and moreover it is not correct. Reaffirmation is done during the bankruptcy, not after, as a filing with the court so as to except the debt from the discharge order. It must be done prior to the discharge order. Indeed, the bankruptcy courts have standard forms for this. For a very nice plain language discussion of this, see the NY Bar Association publication on Understanding Reaffirmation. While a debtor can voluntarily repay a discharged debt after the bankruptcy if he or she chooses, that is not the same thing as a formal reaffirmation of the debt in bankruptcy.
You are correct that reaffirmation and relief from the automatic stay are two different things. Whether relief from the stay might be granted and whether it is needed to resolve the bank's problem in processing payments can’t be determined without more information.
Re: Why Did Bank Lock Mortgage Loan Account and How Do I Get It Unlocked
Most mortgage lenders, upon being notified of the filing, will block on-line payment options. Such is standard procedure. Your attorney can send a “comfort letter” indicating that contact with the debtor will not be deemed a violation of the debtor’s bk rights however, if the lender does not want to reinstate access, there is nothing you can do. As you indicate, you are making payments by other means. Keep doing that and you will be fine. Once your discharge is entered you can “request” that on-line access by reinstated but the lender does not have to grant the request.
Des.
Re: Why Did Bank Lock Mortgage Loan Account and How Do I Get It Unlocked
Thank you, all, for the responses, including the link to the document on understanding reaffirmation, which was quite helpful. Hopefully at this point I know enough about the process to ask semi-intelligent questions of the bank and my attorney going forward. Thanks again.