Author Topic: Bankruptcy notification?  (Read 5320 times)

MTaylor

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Bankruptcy notification?
« on: November 02, 2012, 01:22:34 AM »
I had a note listed on folio that was cancelled for the following reason:

"Your Note listing was cancelled because the borrower on the loan filed for bankruptcy. Note listings whose underlying loans have become subject to a bankruptcy filing are cancelled automatically."

But on the original loan listing there is no mention of bankruptcy. This loan was issued less than 2 weeks ago and has had no payments on it.

https://www.prosper.com/invest/listing.aspx?listingID=651463

I assume this loan is a write-off if the borrower declared bankruptcy. At what point does Prosper notify the lenders? If I hadn't listed it on folio, I wouldn't have known about the bankruptcy. Are the lenders on the hook for this?

Peter

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Re: Bankruptcy notification?
« Reply #1 on: November 02, 2012, 12:26:27 PM »
When a borrower declares bankruptcy it is usually charged off within 30 days. So you are right - you wouldn't have known about this for a few more weeks. When a borrower declares bankruptcy there is not much you can do. Prosper could investigate to dispute the bankruptcy but that is an expensive process and one they have decided is not worthwhile.
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MTaylor

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Re: Bankruptcy notification?
« Reply #2 on: November 02, 2012, 12:34:47 PM »
But if they notify me on Folio, why not on Prosper? If the information is available, why do they not share it with the investor? It's information I can use. This seems to me an unnecessary lack of transparency.

Peter

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Re: Bankruptcy notification?
« Reply #3 on: November 02, 2012, 03:34:10 PM »
That is a good question. I don't know the answer but my guess is it is a regulatory thing. Part of the deal with the SEC regulations may be that they cannot sell a security for a borrower in bankruptcy so their platform takes care of it. I am just guessing. mind you, but that sounds logical to me. Lending Club makes the notes public on any borrower contact so investors can learn there that a borrower has done bankrupt. But there is usually a lag between that notice and the notes being charged off.
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MTaylor

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Re: Bankruptcy notification?
« Reply #4 on: November 02, 2012, 03:47:08 PM »
Peter,

by manually searching through my hundreds of notes, under the offending note, in tiny letters it says "bk filed". When I click on the note from the list view, the note detail says "bankruptcy filed" with a link to their bankruptcy policy (which reads, in essence, you're out of luck). But I only found this because I knew what I was looking for, and it was very deeply buried.

Peter

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Re: Bankruptcy notification?
« Reply #5 on: November 02, 2012, 07:04:30 PM »
Thanks for sharing. I hadn't noticed that before.
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1000Ways

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Re: Bankruptcy notification?
« Reply #6 on: November 02, 2012, 09:17:52 PM »
I just found a BK on a loan today with the same notice.  The borrower had filed for BK back in September, received it Oct 26th and the loan closed afterward (Oct 29th).  I'm wondering why Prosper let it go through...perhaps it was the delay?  In that case it was perfect timing.  And I'm pretty sure I'm out the money before I even had a chance.

The worst part was that the loan was only for 2K so I thought it was somewhat safe.  What I'd like to know is if this person had no intention of paying the loan why they borrowed so little money.  Go out in a blaze of Glory!

1000Ways

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Re: Bankruptcy notification?
« Reply #7 on: November 04, 2012, 10:01:25 PM »
I happened to look at the notes today and I noticed that the BK had been removed from the list.  It would appear that they never funded the loan and therefore gave me my money back.  The timing was weird; however, because I spent the refund and the BK notice came a few days later so it wasn't quite clear what was going on.

Fiscal Sergeant

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Re: Bankruptcy notification?
« Reply #8 on: November 20, 2012, 07:58:27 AM »
I received my first bankruptcy notice at the end of October.  Then it became 3 in the same week.  Two of them are chapter 7 and one is chapter 13.  Like you mentioned one of the loans was funded on 10 Oct and the bankruptcy flag went up on 24 Oct.  In a chapter 7 bankruptcy, the debt is forgotten.  Or for us investors, you are just received a write off.  On chapter 13 the debt is renegotiated and payments are changed so the debt can be repaid.  So depending on which chapter they file determines what could happen to your money.  Now to caveat my two week loan that is now bankrupt, a court will most likely reject the bankruptcy as it is obvious they took the loan out with no intent to repay it.  Under this situation, the court will deny the chapter 7 and they are left to file a chapter 13. 

The bankruptcy flag fell off of my other chapter 7 loan about a week ago, but big surprise it is sitting as one of my late loans.

MTaylor

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Re: Bankruptcy notification?
« Reply #9 on: November 20, 2012, 12:44:35 PM »
Is the Oct. 10 bk, the same loan I have?

Does the borrower an RN who describes himself thusl?

"I graduated from LPN school at the age of 19 and have remained in the medical field ever since. I am currently employed on a medical/oncology unit at a local hospital and work on an as needed basis at a skilled nursing facility. Taking care of individuals in need of help can be very stressful  and requires one to put someone else's need in front of your own. However, it has its high rewards as well. There is no greater feeling than being a part of a team that saves a person's life. I joined the United States Army Reserves as a private in 2006. I would watch the news and see images of soldiers and decided to be a part of it instead of observing. I made the rank Sergeant in less than 3 years. I am utilizing the military's benefits for college funding and will graduate in May of 2012 with a 3 seperate degrees. The degrees include ASN, fine arts, and general education. In my spare time I enjoy fishing and golf. I grew up in the state of Oklahoma and consider myself a die hard OU Sooner football fan. My main focus now is getting rid of my debts that I have accumulated over the past few years. I want to get to the point where I can start saving for retirement and become as debt free as possible.  I am the type of person who hates to owe someone money. It has been over seven years since I have missed a payment or been late on any type of bill and have no plans of starting now. I have withdrawn my previous listing. $4500 of the original request of $9000 was going to be used to pay off my Yamaha account until my wave runner sold.. My wave runner has sold I am only going to borrow only what I need. Thanks everyone!! 
http://www.prosper.com/groups/member_home.aspx?screen_name=Medical_Military-man"

Fiscal Sergeant

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Re: Bankruptcy notification?
« Reply #10 on: November 21, 2012, 06:26:56 AM »
That would be the Chapter 7 loan.  As you can see from my screen name (and if you look at the list of investors you can probably pick out my Prosper name) that I tend to want to help others who are in the military or those who list their occupation as some sort of civil service.  Not sure if he is still in the military since reserves have a 6 year contract and he enlisted in 2006.  But if he is, filling bankruptcy will wreck his career advancement.  I would like to see how he listed his bankruptcy since listed his Net income as 3k a month and his expenses as 1800 and the loan is less than 200 a month.  Hard to be underwater when your bank account grows 1k a month.