Creditors on a Tightrope: Does Terminating a Debtor’s Right to Make Online Payments During Bankruptcy Violate the Automatic Stay?

The U.S. Bankruptcy Court for the District of Maryland held that a mortgage servicer violated the automatic stay when it cut off a Chapter 13 debtor’s access to its online payment portal because she filed for bankruptcy. Before filing, the debtor consistently used the portal to make her mortgage payments. However, after filing, the servicer’s internal policy automatically blocked her access to online payments.

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Summary of the Court Decision

In the case, In re Klemkowski, Bankr. D. Md., Oct. 30, 2024, Arlene Delores Klemkowski, a Chapter 13 debtor, asked the court to require her mortgage servicer (CitiMortgage/Cenlar) to let her resume making mortgage payments through the servicer’s online payment portal. Before bankruptcy, the debtor claims she made her payments electronically, but her access was denied upon filing a Chapter 13 bankruptcy. The debtor argued that by not allowing her to make online payments, it became harder for her to stay current on her mortgage and complete her Chapter 13 plan.

The court found that the debtor’s ability to use the online portal had become part of the parties’ prepetition contractual relationship through their established course of conduct. As such, the right to use the portal constituted property of the bankruptcy estate under Bankruptcy Code § 541, and by unilaterally terminating that right post-petition, the servicer exercised control over estate property in violation of automatic stay (§ 362(a)(3)).

The servicer argued that allowing bankruptcy debtors to use the portal was “impossible” due to system limitations. The court rejected this explanation, characterizing it as a business preference rather than a true technical impossibility. Specifically, the court found that the witness for the creditor was not a software engineer and did not work in the creditor’s information technology system and therefore, could not testify as to the system’s inability to accept electronic payments from the debtor.

Although the court found a stay violation, it did not award monetary damages because the debtor did not present evidence supporting relief under § 362(k). However, because stay violations are void and the court cannot leave the servicer’s conduct in place, the matter is being continued for further briefing on the appropriate remedy. That remedy may include restoring the debtor’s online access.

Ultimately, the decision underscores that creditors may not alter a debtor’s contractual rights after a bankruptcy filing without court approval, and that administrative policies cannot override the protections of the automatic stay.

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Creditors in a No-Win Situation

What the court does not take into consideration is that if a debtor is provided with access to an online payment portal, the debtor could later assert that the mere availability of that portal constitutes an improper “demand for payment” in violation of the automatic stay (§ 362). This risk is the core issue. To avoid any appearance of a demand, creditors would effectively need to design a completely neutral payment interface—one that contains no account information, no stated balance, no suggested or prepopulated payment amount, and no language that could be interpreted as requesting or requiring payment.

In practical terms, this would mean a portal that provides only a generic field for the user to voluntarily enter an amount and a method of remittance, without any terminology that could be construed as a prompt, request, or directive to pay. This adds an additional burden on creditors, while creating risk of a stay violation regardless of which method the creditor chooses.

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What Now?

As this decision expands the scope of what courts consider “property of the estate” and what constitutes “control” under § 362(a)(3), creditors must be cautious: even routine administrative changes can trigger stay violations if they alter a debtor’s prepetition rights. Therefore, going forward, creditors should assume that if the debtor had access to the online payment portal before filing, that access cannot be taken away after filing unless the Bankruptcy Code or a court order expressly allows it. Further, creditors need to ensure that any access to online payments does not constitute an attempt to collect a debt from the debtor. This issue continues to be debated among the courts, and we anticipate further decisions in the near future.