The legal obligations required of servicers handling Chapter 7, 12, and 13 bankruptcy cases in Kansas recently increased because of a new standing order issued by bankruptcy judges in the Midwestern state.
Chelsea Herring, an Associate Bankruptcy Attorney at South & Associates, P.C., said in a statement on the subject that while the stated “purpose of the standing order was to allow servicers to continue sending monthly mortgage statements to debtors post-petition without facing an automatic stay violation; the ultimate result of the standing order generates far more significant, costly duties for servicers.”
Under the new requirements, Herring says, in summation, servicers must do the following:
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“If the servicer sent monthly statements pre-petition, then when the loan is on the debtor's principal resident and the debtor elects to retain (or reaffirm Ch.7) the property, the Standing Order requires mortgage servicers to send debtors post-petition monthly mortgage statements. Nevertheless, a good faith attempt to comply with these requirements will not expose the servicer to an automatic stay violation. This requirement does not extend beyond an order granting the servicer relief from the automatic stay, and the requirement does not apply to servicers who sent debtor pre-petition coupon books rather than monthly statements.”
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Monthly mortgage statements must contain: date of settlement; date of next payment due; amount of current monthly payment; portion of the payment that includes escrow; post-petition amount past due, if any, and from what date; any outstanding post-petition late charges; amount and date of receipt of all payments received since last statement.
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And, upon the debtor's request, the servicer must provide the following information: original maturity date; current interest rate, current escrow balance; interest paid year-to-date; property taxes paid year-to-date.
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And, quarterly, or upon request of debtor, servicers must give the following if post-petition mortgage payments are made through a plan: any other amounts due, including but not limited to charges, fees, assessments, expenses, costs, etc. Proposed changes in payment amount, either due to interest rate changes or escrow changes.
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And, the Servicers Rights to communicate with the debtor include: Any communications servicers send to debtors must state it is for informational purposes and is not a demand for payment or an attempt to collect on a payment; Contact debtors about insurance coverage; respond to inquiries and requests for information from the debtor; send debtor statements, payment coupons, and other correspondence: send to debtor any other communication it sends to its non-debtor customers.
Click here to read the judges' full order.
