Bankruptcy laws provide a means for the financially distressed to achieve
a “fresh start” through either liquidation or repayment. To
ensure debtors are treated fairly and are fully informed throughout the
proceedings, a substantial number of detailed requirements and procedures
must be followed over the course of the bankruptcy life cycle.
Requirements and regulations around bankruptcy can be challenging due to
the combination of complex requirements that can vary by case, jurisdiction
or state. The inherent vulnerability and stress of a bankrupt customer
makes handling these cases especially challenging.
It is important to establish effective bankruptcy management practices
that often require a centralized approach, for large organizations.
Challenges and Best Practices
Based on our experience, some of the top challenges facing Bankruptcy operations
- Protecting Against Automatic Stay Violations and Bankrupt Accounts in Collections Inventory
- Managing Bankruptcy Cases at the Account Level
- Court Filings or Required Notifications
- Tracking of Plan/Customer Payments
- Credit Bureau Reporting
Centralized Customer-Centric Bankruptcy Approach
The inherent risks and customer-centricity of bankruptcy processing combine
to call for establishing a Centralized Customer-Centric Bankruptcy Unit
with specialized legal and processing resources. In this model, the Centralized
Bankruptcy Unit manages the bankruptcy process across all business areas
beginning at initial notification and ending at Discharge or Dismissal.
We continue to see more financial institutions moving towards this model
– taking a centralized approach to handling bankrupt accounts can
enhance overall control capabilities, operational effectiveness and position
your institution for long term sustainability.
Read the paper for more details on how to implement best practices within your financial institution’s