TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/1503450
July 2023 » thefivestar.com 41 July 2023 F E A T U R E Court of Appeals. The final ruling is clear that a borrower cannot unilaterally acceler- ate their obligation under a note or secu- rity agreement. Even if the loan agreement contains an optional acceleration clause, the lender must accelerate and affirmatively in- voke the acceleration clause in order to begin the statute of limitations clock. As the Su- preme Court noted, allowing the borrower to unilaterally accelerate the due date through a bankruptcy discharge was essentially insert- ing a new provision into the contract. The Colorado Supreme Court disagreed. The Court's decision allows borrowers to continue to make payments on their mortgage, if they choose to do so, and allows a borrower to use more of their income for secured debt payments by discharging unsecured debt. This decision also prevents the lender from being forced to pursue foreclosure to prevent the debt from becoming time-barred, most importantly in those situations in which the borrower is making post-discharge loan payments. The Colorado Supreme Court's hold- ing that a bankruptcy discharge does not automatically accelerate or trigger the statute of limitations for the remaining outstand- ing payments clearly is beneficial to both borrowers and lenders. It allows borrowers in bankruptcy to keep their homes by continu- ing to make their monthly payments, as opposed to being forced to pay the debt in full. Additionally, as a result of the decision, lenders are no longer forced into a choice of initiating foreclosure within six years of discharge regardless of the status of monthly payments, or risk forfeiting the ability to ever recover the property. It is a win-win decision for all. The Court's decision allows borrowers to continue to make payments on their mortgage, if they choose to do so, and allows a borrower to use more of their income for secured debt payments by discharging unsecured debt.