Barring Use of an Online Payment Platform Was an Automatic Stay Violation

November 14, 2024

Barring Use of an Online Payment Platform Was an Automatic Stay Violation

Bankruptcy Judge Michelle Harner decided that a mortgage servicer must allow a chapter 13 debtor’s continued use of an online payment platform.

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Opinion Link

View Opinion

https://abi-opinions.s3.us-east-1.amazonaws.com/Klemkowski.pdf

Case Details

Case Citation

Klemkowski v. CitiMortgage Inc. (In re Klemkowski), 22-10257 (Bankr. D. Md. Oct. 30, 2024).

Case Name

Klemkowski v. CitiMortgage Inc. (In re Klemkowski)

Case Type

Business

Court

4th Circuit

Maryland

Bankruptcy Tags

Automatic Stay

Consumer Bankruptcy

Mortgage

Business Reorganization

Comments

Submitted by Kyle Arendsen on November 14, 2024

Significantly interfering with a debtor's contractual rights arising from a prepetition contract is an "exercise of control" and therefore a stay violation. Thanks for the terrific overview! It would be interesting to see where the line is drawn between a mere contract breach and a change in the status quo.

Submitted by Edward Boltz on November 14, 2024

Particularly following Trantham v. Tate, A Chapter 13 plan could certainly include a provision that requires that mortgage servicers continue to provide debtors with online access to their accounts in the same manner as prior to bankruptcy. Additionally, unmentioned in this opinion is that 11 USC 1322(b)(2) prohibits the modification of mortgages secured only by real property secured by the debtor's principal residence. This primarily protects mortgages (subject to far more exceptions than mortgage servicers like to admit- mobile homes, escrows as collateral, matured mortgages, rental properties, etc.) from cram-down. But 1322(b)(2) is a sword that cuts both ways and prohibits mortgage servicers from also seeking to change the terms of a note because the homeowner has filed bankruptcy. In this context, that would make discontinuation of any services required under the Note and/or Deed of Trust an illegal modification by the servicer.