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If we believe that a house securing a mortgage has been abandoned, and the borrower has filed for bankruptcy, do we have the right to enter the property and winterize it? Can we request permission from the borrower to enter the property, even if the automatic stay applies? – IBA Compliance Connection

IBA Compliance Connection

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If we believe that a house securing a mortgage has been abandoned, and the borrower has filed for bankruptcy, do we have the right to enter the property and winterize it? Can we request permission from the borrower to enter the property, even if the automatic stay applies?

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We do not recommend contacting the customer or entering the property. The Bankruptcy Code’s prohibition on actions to collect a debt after a borrower has filed for bankruptcy (the “automatic stay”) applies to “any act to exercise control” over the property. Requesting permission to enter the property and entering the property to make repairs or changes could be viewed as an attempt to exercise control over the property.

We note that the Illinois Mortgage Foreclosure Law includes a fast-track process for foreclosing on properties that qualify as “abandoned residential property,” and Illinois law does provide a safe harbor for lenders and their agents to enter such properties to secure and maintain them. However, these provisions are subject to the Bankruptcy Code’s automatic stay, and we would not proceed to contact the borrower or enter the borrower’s property without consulting with bank counsel.

For resources related to our guidance, please see:

  • Bankruptcy Code, 11 USC 362(a)(6) (A petition filing for bankruptcy “operates as a stay, applicable to all entities, of . . . (3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate; . . .”)
  • Illinois Mortgage Foreclosure Law, 735 ILCS 5/15-1505.8 (“Expedited judgment and sale procedure for abandoned residential property. . .  .”)
  • Criminal Code of 2012, 720 ILCS 5/21-3(e-5) (“(Mortgagee or agent of the mortgagee exceptions. (1) A mortgagee or agent of the mortgagee shall be exempt from prosecution for criminal trespass for entering, securing, or maintaining an abandoned residential property. (2) No mortgagee or agent of the mortgagee shall be liable to the mortgagor or other owner of an abandoned residential property in any civil action for negligence or civil trespass in connection with entering, securing, or maintaining the abandoned residential property. . . .”)