Navigation:  Loans > Loan Screens > Bankruptcy and Foreclosure Screen Group > Bankruptcy Detail Screen > Placing a Customer in Bankruptcy > Results of Bankruptcy on Accounts

When a bankruptcy is successfully processed, the following items occur on the loan:

 

•The Date Bankruptcy Posted will be indicated.

•The Consumer Information Indicator on the account will display the selected bankruptcy chapter filing. It will be reported in Base Field #38 in the the Credit Report and transmission sent to credit repositories after monthend.

•The proper Hold Codes will be placed on the account (4 for Chapters 7, 11, or 12 or 5 for Chapter 13).

•Do Not Send Statements for this Account will be checked.

•Advertising will be changed to Do Not Advertise.

•Overall Credit Limit will be changed to zero (0).

•Individual credit limits will be changed to zero (0).

•Late Charges Due will be zero (0), unless Institution Option BKLC is enabled.

•Late Code will be changed to “0 - No Late Charge.”

•Number Of Bankruptcy Filings increases by one.

•Any automatic or Recurring payments are stopped on the account (checks the Stop Loan Autopay box).

•Sets Action Code 94 (Credit Bureau Date of Occurrence) with the Date Bankruptcy Filed (if it isn't already on the account).

•The Phone Restriction field is changed to "13 - Contact Attorney Only." This field appears in two places: 1) the Customer Relationship Management > Households screen > Names tab > Phones tab, and (2) Loans > Marketing and Collections screen > CIF tab, then click the Edit Phone link.

•The Email Restriction field is changed to "1 - No Email Allowed." This field appears in two places: 1) the Customer Relationship Management > Households screen > Names tab > Email tab,, and (2) Loans > Marketing and Collections screen > CIF tab, then click the Edit Email link.

•"BKRPT" appears in the Alert Status line at the top of every screen.

 

Credit Reporting

 

After a loan is bankrupt, the system reports it as such during monthend credit reporting. It updates the Consumer Information Indicator on the account with the applicable bankruptcy chapter filing. The Credit Report and transmission (FPSRP184) is used to send the credit repositories a transmission of all activity on accounts. Using this transmission, the system updates the Account Status (Base Field 17A) from the applicable bankruptcy Hold Code and also transmits the correct Consumer Information Indicator in the appropriate field (Base Field 38 or Field 11 in either the J1 or J2 Segments).

 

The account continues to be reported as a bankruptcy for up to 7 years, unless a different action is run on the account, as described in Further Changes to a Bankruptcy below.

 

Undoing a Bankruptcy

 

A bankruptcy can be undone, but only before monthend is run for the first time on the bankrupt account. After monthend, an action code and date will be needed to report any change to credit reporting agencies. See Further Changes to a Bankruptcy below.

 

Further Changes to a Bankruptcy

 

Flagging an account as bankrupt is usually just the initial step of finalizing a bankrupt loan. As the bankruptcy progresses, you will need to process other transactions. The following transactions are also available from the Bankruptcy Detail screen that further affects a bankruptcy. These transactions are displayed in the Actions and Dates field group and cannot be run until after a Bankruptcy transaction. Bankruptcy courts will send you letters when some of these actions take place, or some of these actions are dependent on decisions by your institution.

 

•For Chapters 7, 11, or 12, you can reaffirm debt. This allows the borrower to keep their collateral, but they still must make payments on their loan. Sometimes the loan is renegotiated with different interest rates and payment dates, as well as writing off some of the amount due based on Bankruptcy rulings. See Reaffirmation for more information. Debtors can also keep collateral if filing a Chapter 13 bankruptcy with additional repayment plans for past arrearages. See Confirmed By Court Chapter 13 field group.

 

•If the borrower decides to change what type of bankruptcy chapter he or she is filing, you will need to run the Convert Chapter transaction.

 

•If the bankruptcy is dismissed by a Bankruptcy Court, you will need to run the Dismissal transaction. However, sometimes dismissed bankruptcy cases are reinstated. See Dismissal/Reinstatement for more information.

 

•If the debt is made whole by a guarantor or for other reasons and your institution wants to withdraw the bankruptcy, you can run the Withdrawn transaction to essentially reverse the bankruptcy transaction. The account will be reported to credit repositories with the correct Account Status and Consumer Information Indicator.

 

•If the Bankruptcy Court has ruled that the debt is discharged, run the Discharge transaction. This means the bankruptcy is complete and the debt has been discharged (the Court has determined the debtor cannot repay the debt).

 

•When the Bankruptcy Court sends a letter notifying you that the bankruptcy is closed, run the Close transaction. This usually occurs shortly after a discharge or dismissal has been issued. It is essentially an administrative entry, indicating the court's role in a case is over. A bankruptcy case is closed after all applicable deadlines for objections have passed and the case trustee has submitted a report indicating his work is complete. Again, the correct Account Status and Consumer Information Indicator will be reported to credit repositories after this transaction is run.