Reporting an Account in Bankruptcy |
  
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Reporting an Account in Bankruptcy |
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If a loan is involved in a bankruptcy, you must report bankruptcy information only for the individual filing bankruptcy. For example, if two brothers were co-signers on a loan and one of them filed for bankruptcy, you should report the bankruptcy information only for the brother filing the bankruptcy.
Bankruptcy information is reported by using a combination of Hold Codes and the Consumer Information Indicator code (CIID), as described below.
Using the Bankruptcy Detail screen (or Bankruptcy screen if using the old bankruptcy system), you should first run the Bankruptcy transaction on the account (or accounts). This will flag the accounts with the appropriate (CIID) for credit reporting purposes, such as Petition for Chapter 7, 11, 12, or 13 bankruptcy. As the bankruptcy proceedings move along and you receive further letters from the bankruptcy court updating the bankruptcy details, you would run additional transactions applicable to those accounts.
Running these transactions will automatically flag the bankrupt account appropriately for credit reporting purposes.
The following topics are discussed below:
Hold Codes are automatically placed on accounts when a Bankruptcy transaction is run. See Results of Bankruptcy on Accounts in the Bankruptcy Detail screen help for more information. Any loan involved in a bankruptcy must have one of the following hold codes:
Hold Code |
Description |
|---|---|
4 |
Chapter 7, 11, or 12 |
5 |
Chapter 13 |
Hold codes affect the Account Status (Base Field 17A) of the Credit Report transmission (FPSRP184).
•If Hold Code 4 is on the account, the Account Status is code 67 (account in bankruptcy Chapters 7, 11, or 12).
•If Hold Code 5 is on the account, the Account Status is code 69 (account in bankruptcy Chapter 13).
The Consumer Information field identifies the status of the bankruptcy such as filed, discharged, dismissed, or withdrawn. These codes are automatically assigned when a Bankruptcy transaction is run on an account. (See Results of Bankruptcy on Accounts and Actions and Dates field group on the Bankruptcy Detail screen for more information). The Consumer Information Indicator is found in the Base Segment (Base Field 38) and J1/J2 Segments (field 11) of the Credit Report transmission (FPSRP184).
If the IRS owner (in CIF) has filed the bankruptcy, the system will automatically update the Consumer Information Indicator code (CIID).
Some institutions allow a portion of debt to be written off if the borrower agrees to reaffirm part of the debt during bankruptcy proceedings. When a partial write-off occurs during reaffirmation of debt, the system reports the written off amount in a secondary tradeline (account) during monthend credit reporting (FPBY record).
•The reaffirmed debt is reported with Consumer Information Indicator of "R - Reaffirmation of Debt" and an Account Status of 11 (account current).
•The write-off amount is updated accordingly:
oNew tradeline with a new account number is reported to credit repositories. This new tradeline reports the Principal Balance as the written-off amount. The Original Balance is reported with the original balance of the loan.
oSince the written off amount is included with the bankruptcy, the Consumer Information Indicator is reported as the bankruptcy with which the account is filed. For example, if the account was a Chapter 7 petition, the written off amount would be reported with Consumer Information Indicator of "A - Petition for Chapter 7 Bankruptcy."
oThe Account Status is reported with the same code as before the Bankruptcy transaction was run.
See the Reaffirmation: Standard help topic in the Bankruptcy Detail screen for more information.
A discharge releases a bankrupt customer from personal responsibility for specified debts. When you run the Discharge transaction from the Bankruptcy Detail screen, the system changes the Consumer Information Indicator to one of the Bankruptcy Discharge codes (such as, E, F, G, H), depending on the type of bankruptcy chapter that was applied to the account.
See the Discharge transaction help topic in the Bankruptcy Detail screen for more information.
A Dismissal occurs when a debtor has failed to adhere to the terms and conditions of their bankruptcy and the court has allowed your institution to pursue the funds owed. You will receive a notice from the bankruptcy courts indicating the bankruptcy has been dismissed, and you can reinstate the terms of the loan.
When you run the Dismissal transaction from the Bankruptcy Detail screen, the system changes the Consumer Information Indicator to one of the Bankruptcy Dismissal codes (such as, I, J, K, L), depending on the type of bankruptcy chapter that was applied to the account.
See the Dismissal transaction help topic in the Bankruptcy Detail screen for more information.
If a withdrawal of claim has been granted by a bankruptcy court, you can run the Withdrawn transaction to essentially reverse the Bankruptcy transaction, and the borrower is required to continue making payments on their loan.
When you run the Withdrawn transaction from the Bankruptcy Detail screen, the system changes the Consumer Information Indicator to one of the Bankruptcy Withdrawn codes (such as, M, N, O, P), depending on the type of bankruptcy chapter that was applied to the account.
See the Withdrawn transaction help topic in the Bankruptcy Detail screen for more information.