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Insights for Best in Class Consumer Bankruptcy Processes

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 groups include:

  • 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 bankruptcy operations.

Category: Default Management