We live in a digital era with smart phones, smart TV’s, and even smart homes. Every business in the world has the ability to now automate many of their processes. However, even with the availability of automation, there are still organizations using old technology that is inefficient and no longer cost effective. One such example is filing notifications of bankruptcy for loan servicers and banks.
Traditionally, searching for bankruptcies meant going to PACER for court records to see if anyone who filed a bankruptcy matches one of your borrowers in your credit portfolio. Some even wait for U.S. mail or for a call from the mortgagor or mortgagor’s attorney to advice of a bankruptcy filing. Both of these methods come with a significant amount of risk.
The timing of identifying active bankruptcies is extremely important. Loan servicers and banks don’t have the time or resources to manually cross reference their credit portfolios and the U.S. Bankruptcy Court records every day to find and identify borrowers that enter bankruptcy. In order to do that a team of people would have to search every single bankruptcy court for new postings that match their data base of borrowers, day in and day out. That is not a viable solution for any company that manages any size credit portfolio. However, it is imperative that these companies uncover these borrowers as soon as possible. Failing to identify these borrowers leaves the company at risk of incurring large penalties and possible lost revenue from lack of participation.
Below is a list of reasons why identifying borrowers in bankruptcy is important to banks and loan servicers:
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Risk of fines from breaking bankruptcy regulations
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Loss of revenue from failure to participate in bankruptcy
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Creditor ordered to pay damages to the debtor (i.e. attorney fees and costs)
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Forfeiture of claim and/or asset
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Risk of violating the stay
However, in order to complete a comprehensive search, the following information is needed, and without this information, the chance of locating the correct case is greatly diminished:
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Region the bankruptcy was filed in
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Case number
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Case title
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Date filed or closed
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Party name(s)
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Chapter filed
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SSN
Even though it is imperative to identify borrowers in bankruptcy, manually searching the U.S. Court System is cumbersome and time consuming because:
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It is labor intensive and therefore a costly process for locating an active bankruptcy that matches a borrower in your credit portfolio
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Results can vary and display multiple matches, which can lead to inaccurate results
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There is an inability to automatically narrow search results
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It does now allow for a proactive, automated method to update the creditor’s system of record
But not all hope is lost! The most effective way to overcome these hurdles is to use technology to your advantage. Today, there is an automated process that can validate bankruptcies and provide an easy to digest report of matching borrowers linked to active or new bankruptcies. By automating the process there is not only time savings, but it also opens up resources to do other important work. Jump in on the automation revolution!
