Yes, if a delinquency exists on an account under the terms of the original loan agreement, a bank may report the account as delinquent.  Although a bankruptcy filing triggers an automatic stay that prohibits a creditor from engaging in any activity that might be construed as an attempt to collect on a debt, the stay does not bar the creditor from reporting accurate information regarding a delinquency to a credit reporting agency.

The Fair Credit Reporting Act imposes a duty on entities that provide information to a consumer reporting agency (a furnisher) to provide accurate and complete information. Courts have routinely found that a debt subject to a Chapter 13 plan is still a debt that is only fully extinguished after it is discharged by a bankruptcy court. And an Illinois court has expressly held that “prior to discharge, reporting a loan balance and [its] delinquent status per the original [loan] terms — as opposed to the modified terms of the confirmed Chapter 13 plan — is neither inaccurate nor misleading.”

If the customer is advising you that they are current on their Chapter 13 plan payments, but the bank has not received a distribution from the Chapter 13 trustee, or has received less than the specified plan payment, we recommend having your bankruptcy counsel contact the Chapter 13 trustee’s office to determine the status of the customer’s plan payments and the trustee’s next distribution. Regardless, even if the customer has made all of their required payments under the Chapter 13 plan, the account still may be reported as delinquent if the distributions the bank is receiving are insufficient to bring the loan current according to its original terms.

For resources related to our guidance, please see:

• U.S. Bankruptcy Code, 11 USC 362(a)(6) (“[A] petition filed under section 301, 302, or 303 of this title . . . operates as a stay, applicable to all entities, of . . . (6) any act to collect, assess, or recover a claim against a debtor that arose before the commencement of the case under this title.”)

• Fair Credit Reporting Act, 15 USC 1681s-2(a)(1)(A) (“A person shall not furnish any information relating to a consumer to any consumer reporting agency if the person knows or has reasonable cause to believe that the information is inaccurate.”)

• McGee v. Rockford Mercantile Agency, Inc., Case No. 17 C 50214 (N.D. Ill. April 24, 2018) (“Because a debt subject to a Chapter 13 confirmation plan is only fully extinguished after it is discharged by a bankruptcy court, this court finds persuasive the reasoning of the judges in this and other districts who have concluded that at least prior to discharge, reporting a loan balance and delinquent status per the original terms — as opposed to the modified terms of the confirmed Chapter 13 plan — is neither inaccurate nor misleading.”)