When a borrower files bankruptcy, open a case on the loan's Bankruptcy tab (next to Foreclosure). It works like the foreclosure case — a timeline, reminders, and document attachments — with a chapter-driven interest model built to support a proof of claim or a reinstatement figure.
Opening a case
Pick the chapter — the one required choice, no default:
- Chapter 7 — Liquidation
- Chapter 13 — Wage-earner (cure-and-maintain)
- Chapter 11 — Reorganization
- Chapter 12 — Family farmer
- Other
Record the identifiers you'll need for PACER and the claim: case number, court / district, judge, trustee, and debtor's attorney, plus the key dates — the §341 meeting, the claims bar date, and the plan-confirmed date. Court dates with a reminder feed the shared Calendar.
The proof-of-claim snapshot
At the filing date NoteHarbor snapshots the secured claim: unpaid principal, accrued interest, pre-petition arrears (the missed P&I), late charges, escrow advances, fees, days delinquent, and the collateral value. The pre-petition arrears are frozen as the claim baseline. Every figure carries a tracking-estimate disclaimer — it supports the filing; counsel confirms the legal number.
How interest is treated
The chapter plus an oversecured flag set the case's interest policy:
- Frozen — post-petition interest stops accruing (an undersecured Chapter 7). The frozen stay-period interest is recaptured if the case is later dismissed or relief is granted.
- Accruing — interest continues (Chapter 13/11/12 cure-and-maintain, or any oversecured case, under §506(b) up to the equity cushion).
While the stay is on, the loan is treated as non-performing: no new late fees accrue and late-payment reminders won't send.
Homestead
If the collateral is the borrower's primary residence, flag the loan Homestead (in Edit Loan). Both the Bankruptcy and Foreclosure tabs surface it prominently, because homestead status drives Chapter 13 anti-modification and the equity analysis. The mortgage lien is still enforceable by foreclosure.
Resolving the case
Close the case with a resolution, and NoteHarbor applies the right effects:
- Dismissed — the loan returns to Active (the delinquency job re-derives its status) and the frozen interest is recaptured.
- Relief from stay granted — a foreclosure case opens and the frozen interest is recaptured.
- Discharged — the loan stays non-performing with the lien surviving; post-petition interest is waived by default.
- Closed — an administrative close with no interest change.
A chapter conversion (say 13 to 7) is logged as an event, not a resolution — the stay continues and only the chapter and policy change.
These figures are tracking estimates to support a proof of claim or reinstatement, not legal advice. Bankruptcy is a federal court process — have counsel validate anything that drives a filing. A note in bankruptcy can't be sold through the guided sale until the case resolves.