The Bankruptcy Court for the District of Maryland recently found, in the case of Klemkowski v. Citimortgage (10/30/24), that a bank's refusal to accept mortgage payments through its online portal was a violation of the automatic stay of section 362(a)(3) of the Bankruptcy Code. The Bankruptcy Court reviewed the pre-petition agreements entered into between the Bank and the Chapter 13 Debtor and found that the Debtor did, in fact, have a prepetition contractual "right to use" the online portal which became part of the Bankruptcy Estate through the Debtor's legal and equitable interests in the parties' prepetition agreements. The Court held that the Bank's unilateral restriction of the Debtor's right to use the portal effectively terminated that agreement which was a violation of the automatic stay. Although the Bankruptcy Court stated there was insufficient proof in the record to award monetary damages it did not rule out awarding such damages in future cases with similar facts. The Court further held that even though it would not award monetary damages in this case, it was necessary to fashion some remedy to address the Bank's ongoing violation of the statutory injunction.
Although the decision of the Bankruptcy Court was based upon facts specific to the case, it demonstrates that financial institutions must use caution when altering the status quo with respect to bankrupt customers rights.
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