The Bankruptcy Lawyers Blog

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You have finally secured a bankruptcy discharge for your client. However, your client informs you that after the discharge he or she is still receiving billing statements from the mortgage company. This may even leave you a little perplexed because you assured your client that upon receiving the discharge all communications from creditors had to cease and any communication by a creditor was in violation of the discharge.

However, an exception under 11 USC 524(j) may sanction this type of communication if the following factors are present:

• The creditor retains a security interest in real property that is the principal residence of the debtor
• Such an act is in the ordinary course of business between the creditor and the debtor
• Such act is limited to seeking or obtaining periodic payments associated with a valid security interest in lieu of pursuit of in rem relief to enforce the lien.

If the communication meets the standards above, the lender is not in violation of the discharge. However, if your client has surrendered the residence and vacated the property in bankruptcy, the argument can be made that is it no longer the principal place of residence. Also, this provision does not apply to rental or investment property. No such provision allows this type of communication while the bankruptcy petition is pending.

So, as you advise your clients before, during, and after the bankruptcy filing be sure to make note of this limited exception.