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For more details on Chapter 7 personal bankruptcy, see Practice Note, Chapter 7 Liquidation: Summary (W-000-6231). Releasing Debt Under Chapter 13 A Chapter 13 debtor will generally choose to file a Chapter 13 case to keep the family home. Usually, this is done when a Chapter 13 debtor chooses to catch up on overdue payments and make go forward payments under the terms of the Chapter 13 plan of payment.

If the debtor receives a discharge however remains in ownership of the home despite an intent to surrender in the validated strategy, the debtor is discharged of personal liability. However, the security interest endures the discharge. For more details on Chapter 13 personal bankruptcy, see Chapter 13 Personal bankruptcy Timeline (W-019-8355). Area 24(J) Safe Harbor Section 524(j) of the Bankruptcy Code provides a restricted safe harbor for a creditor holding a protected claim on the debtor's primary house that looks for to collect regular payments from the debtor in the ordinary course in lieu of foreclosure relief.

Section 524(j) does not totally safeguard against allegations of discharge injunction offenses that can occur from communications connecting to collecting payments on the mortgage debt. If servicers choose to accept payments in lieu of foreclosing on the home post-discharge, it is crucial to make sure that all servicing activity, particularly interactions: Are directly customized to remove the risk that they are considered as coercive.

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Post-Discharge Communication While it is widely accepted that a home mortgage servicer might send out informational declarations to a discharged debtor (see Finest v. Nationstar Mortg. LLC, 540 B.R. 1, 10-11 (B.A.P. 1st Cir. 2015)), statements that attempt to persuade payment break the discharge injunction. For that reason, servicers must adapt servicing correspondence to prevent a discharge violation through regular correspondence such as: Regular statements.

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Loss mitigation solicitations. Loss mitigation is usually governed by financier requirements whereby the loan servicer obtains the debtor for details to evaluate it for prospective loss mitigation choices. Find More Details On This Page can mitigate or minimize the loss to the investor arising from a debtor's default. In some situations, loss mitigation can help a customer keep its house through a loan adjustment (see Standards For Post-Discharge Loan Adjustment).