Topic: Bankruptcy
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How should we report consumer real estate loan payments that have not been paid after the customer has filed for bankruptcy? We have been reporting the loan as “past due” to the credit bureau, is this correct?
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We believe that you should continue to report the loan as delinquent. 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. 15 U.S.C. 1681s-2(a)(1)(A). Unless you have received notice that the debt has been discharged, it remains accurate…
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Can we continue to send home equity statements if the borrower has filed for bankruptcy under Chapter 13?
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We recommend that you review your home equity statements to determine whether they may be construed as attempting to collect on the outstanding debt. If they demand payment in any way, even if it is voluntary repayment, we recommend that you do not send the statements. We also strongly recommend that you seek the advice…
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Does Illinois have its own bankruptcy code or should we follow the U.S. Bankruptcy Code? This is for purposes of training a new loss mitigation person.
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No, Illinois does not have its own bankruptcy code, and all bankruptcies are handled in the federal bankruptcy court system (though federal bankruptcy proceedings may rely heavily on Illinois law). However, note that individuals and companies in Illinois may choose to wind down a company or liquidate assets outside of the federal bankruptcy system by…
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We forgave a business loan in January 2012, some time after the borrower had filed for bankruptcy. We never filed a Form 1099-C. When is that form required to be filed?
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The timing for filing Form 1099-C depends on when a number of events related to the loan occur, and the fact that a borrower filed for bankruptcy may change the timing. The IRS instructions state that a form 1099-C should be filed “for the year in which an identifiable event occurs.” IRS Instructions, Form 1099-C,…
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Once bankruptcy proceedings have commenced, can we file financing statements to perfect our liens on our loan collateral if we haven’t already done so?
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We do not recommend taking any action to perfect security interests against a debtor who has filed for bankruptcy. Once a bankruptcy case has commenced, the Bankruptcy Code prohibits all creditors from making “any act to create, perfect, or enforce against property of the debtor any lien” to enforce a security interest that arose before…