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In general, when a borrower files for bankruptcy, and your agency receives legal notification of that filing, the account is “frozen” until the outcome is determined. There are several steps to be taken in GMS-RLSS software to accommodate the bankruptcy.
The court may request a document as proof of claim toward the bankruptcy. Utilizing the Feature Loan Payoff, a document may be printed that reflects the principal balance and interest that has accrued through the date entered in step #2 above.
Once the bankruptcy is settled, you should receive a statement informing you of the amount awarded your claim by the court, along with an interest rate, if any, that may now be applied to the loan. If the new interest rate is zero, no activity needs to be recorded. If a revised rate is now in effect, repeat step #2 above, using the date interest is reinstated as the activity date and then edit the Loan Master file to reflect the new interest rate. When payments resume, be prepared to see part of the payment applied to accrued interest. This will be reflected as a negative number within the “accrued interest” field on the activity screen.
If the loan was set to Amortized prior to the bankruptcy, once the above steps are taken the Loan Master file may be changed from Daily interest back to Amortized.