We are working on converting our core, and a question came up about freezing certain mortgage servicing during Chapter 7 bankruptcy. One of the options is to freeze ARM adjustments. Does anyone know if an ARM adjustment can be made during Chapter 7 bankruptcy?

You need to be talking to your bankruptcy attorney, but unless you are otherwise ordered by the court, the fact that they have filed does not usually impact the current legal obligation of the borrower. It only protects the borrower from certain actions until things are settled out.

You should definitely speak with a bankruptcy attorney to see how the stay affects an ARM adjustment. I could see the adjustment being more of a problem with a Chapter 13 as that involves a payment plan generally over three to five years. However, a Chapter 7 bankruptcy could be impacted because household debt calculations are involved.

Thank you for responding and for the advice! I will reach out to our attorney.