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What happens if a borrower files for bankruptcy?

When we receive notice of a borrower bankruptcy filing, we cease all automatic monthly payments on any related borrower loan and defer any other collection activity as required by law. The status of the borrower loan, which the relevant investors may view through the website, switches to “bankruptcy.” We then determine whether we have a basis to object to the inclusion of the debt in any bankruptcy action (e.g., based on the time between loan origination and bankruptcy filing). If the proceeding is a Chapter 7 bankruptcy filing seeking liquidation, we attempt to determine if the proceeding is a “no asset” proceeding, based on instructions we receive from the bankruptcy court. If the proceeding is a “no asset” proceeding, we take no further action and assume that no recovery will be made on the borrower loan. In all other cases, we file a proof of claim involving the borrower.

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