Bankr. MD: In re Klemkowski- Online Access to Mortgage Account during Chapter 13

Summary:

Judge Harner of the Maryland bankruptcy Court  evaluated whether CitiMortgage Inc. and its servicer Cenlar FSB violated the automatic stay under 11 U.S.C. § 362(a)(3) by denying debtor Ms.  Klemkowski access to her online payment portal after she filed for bankruptcy. Before the bankruptcy filing, Klemkowski had used this portal to make mortgage payments, but her access was revoked upon her filing. She argued this change impeded her ability to comply with her repayment obligations.

The court ruled that the right to use the online portal (just another twig in the bundle of sticks), as per the prepetition agreements, became part of Klemkowski's bankruptcy estate, and that the servicer’s unilateral denial of access post-filing effectively violated the automatic stay by altering her contractual rights. However, the court found no sufficient evidence to award monetary damages since Klemkowski continued to make payments through other means, though less conveniently. The stay violation was deemed void ab initio, and the court allowed further proceedings to determine appropriate remedies, potentially including restoring portal access to uphold the debtor’s contractual rights within the bankruptcy framework.

Commentary:

It would seem that,  again coupled with  Trantham,  a debtor could propose a nonstandard plan provision  that required mortgage servicers to allow online access, because not only does nothing in the Bankruptcy Code prohibit such a provision,  but the refusal by mortgage servicers is,  in Judge Harner's words,  "troubling and inconsistent with the general policies underlying the Code and consumer protection laws."

As an example,  the MDNC Local Form Plan at 8.2d  already  provides that:

• The Holder shall continue to send monthly statements to the Debtor in the same manner as existed pre-petition and such statements will not be deemed a violation of the automatic stay.

Recognizing that in 2024  online access is essential and essentially the same as periodic monthly statements  seems only a modest step further,  with a such a nonstandard  provision perhaps being:

• The Holder shall continue to send monthly statements to the Debtor and to allow the Debtor online access to their account in the same manner as existed pre-petition and neither such statements nor information provided through the online access will not  be deemed a violation of the automatic stay.

With proper attribution,  please share this post.