The AmeriFirst Financial bankruptcy does not change your mortgage. Your loan still exists, your interest rate and payment amount are the same, and you still owe every scheduled payment on time. What has changed is who collects that payment. AmeriFirst Financial, Inc. (AFI) and its affiliate Phoenix 1040 LLC filed Chapter 11 in the District of Delaware on August 24, 2023, and on January 14, 2026, the court confirmed a plan of liquidation rather than a reorganization, with an effective date of February 1, 2026.1Omni Agent Solutions. AmeriFirst Financial Inc. Restructuring Website Because AFI is being wound down, servicing rights on the loans it handled are being sold to other companies, and your job as a borrower is to make sure that handoff goes cleanly.
Your Loan Still Exists and Payments Still Matter
Your promissory note and mortgage are contracts between you and the loan’s owner. A servicer’s bankruptcy doesn’t cancel them, pause them, or give you a grace period. The automatic stay that took effect when AFI filed protects AFI from its creditors; it does not protect you from the consequences of missing your own payments. Late fees, credit reporting, and eventually foreclosure can all proceed against you regardless of what is happening in the Delaware bankruptcy court.
Assuming otherwise is the single most expensive mistake borrowers make when a servicer collapses. Keep paying on schedule, using the payment method and address you were using before, until you receive written notice telling you to do something different.
Watch for the Servicing Transfer Notice
Servicing rights are valuable, and in a liquidation they get sold to raise cash for the estate. When your loan moves to a new servicer, Regulation X requires the outgoing servicer to send you written notice at least 15 days before the transfer takes effect. That notice must include the new servicer’s name, address, and payment instructions, and the new servicer must send its own confirming notice.2Consumer Financial Protection Bureau. 12 CFR 1024.33 – Mortgage Servicing Transfers
Do not change where you send your payment based on a phone call, an email, or a text. Wait for the written notice from both servicers, and confirm the details match before you redirect a single dollar. Payment redirection scams follow servicer failures closely.
Federal rules also give you a cushion if you send a payment to the wrong place during the transition. For 60 days after the transfer date, a payment mailed to the old servicer cannot be treated as late; the old servicer must forward it or return it with instructions.3eCFR. 12 CFR 1024.33 – Mortgage Servicing Transfers After day 60, that protection ends, and a misdirected payment can trigger late fees and credit reporting.
Check Your Escrow Balance After the Transfer
Escrow money belongs to you, not to the servicer. If AFI held an escrow account for your property taxes and homeowner’s insurance, those funds are supposed to be kept separately from company operating money and passed to the new servicer at transfer.
Pull your most recent escrow analysis statement from AFI. When the new servicer sends its first statement, compare the opening escrow balance against AFI’s closing balance. If the numbers don’t match, contact the new servicer in writing and keep the response. Catching a discrepancy early is what prevents a missed property tax installment or a lapsed insurance policy months later.
The new servicer may run its own escrow analysis and identify a shortage. There are limits on how fast it can collect. A shortage of less than one month’s escrow payment can be demanded within 30 days or spread over at least 12 months; a shortage of one month or more can only be spread over at least 12 months. The servicer may also hold a cushion of up to one-sixth of the estimated annual escrow disbursements.4Consumer Financial Protection Bureau. 12 CFR 1024.17 – Escrow Accounts If the new servicer tries to collect a large shortage in a lump sum, push back and cite the rule.
If You Were in Loss Mitigation or Behind on Payments
A servicing transfer does not erase where you stood with AFI. If you had submitted a complete loss mitigation application (loan modification, forbearance, short sale, or similar) and it was still pending on the transfer date, the new servicer must evaluate it within 30 days and honor the timing based on when AFI originally received it.5Consumer Financial Protection Bureau. 12 CFR 1024.41 – Loss Mitigation Procedures If AFI had already offered you an option and your acceptance deadline hadn’t run out, the new servicer must give you the remaining time.
Foreclosure cannot begin until your loan is more than 120 days delinquent, and the new servicer cannot move for a foreclosure judgment or sale while a complete loss mitigation application is under review, provided you submitted it more than 37 days before any scheduled sale.6eCFR. 12 CFR 1024.41 – Loss Mitigation Procedures
Records get lost in transitions. Save copies of every application, financial document, and letter you exchanged with AFI. If the new servicer says it has no record of your application, the paper trail is what forces the rules above to apply.
If AmeriFirst Owed You Money
Some borrowers had prepetition claims against AFI itself: disputed fees, unrefunded overpayments, escrow errors, or similar amounts. Those made you a creditor in the bankruptcy, and to share in any distribution you had to file a Proof of Claim with Omni Agent Solutions, the appointed claims agent.7GovInfo. 23-11240 – AmeriFirst Financial Inc – Content Details
The deadlines have passed. The general bar date was December 29, 2023, and the governmental bar date was February 20, 2024.1Omni Agent Solutions. AmeriFirst Financial Inc. Restructuring Website Claims filed after those dates are generally disallowed. The only remaining path is a motion asking the court to accept a late claim on grounds of excusable neglect, which is a high standard.
Even for creditors who filed on time, expect a small recovery. Secured creditors are paid first from their collateral. Then the Bankruptcy Code’s priority tiers take over, starting with administrative expenses of the case itself and running through wages, benefits, customer deposits, and tax claims before general unsecured creditors get anything.8Office of the Law Revision Counsel. 11 USC 507 – Priorities A borrower disputing a fee sits at the bottom of that stack. In liquidations, general unsecured recoveries are usually pennies on the dollar and sometimes zero.9United States Courts. Chapter 11 – Bankruptcy Basics
Cancelled Debt and Taxes
A servicing transfer, by itself, does not cancel anything you owe, so most borrowers will not see a tax consequence from this bankruptcy. The issue arises only in the narrower case where AFI (or the estate) actually forgives part of a debt you owed. Cancelled debt of $600 or more is normally reported to the IRS on Form 1099-C and treated as taxable income.10Internal Revenue Service. About Form 1099-C, Cancellation of Debt
There is an exclusion for debt discharged in a Title 11 bankruptcy case. Under 26 U.S.C. § 108, that discharged amount is not taxable income if the discharge came from the court or from a court-approved plan.11Office of the Law Revision Counsel. 26 USC 108 – Income From Discharge of Indebtedness You claim the exclusion by filing IRS Form 982 with your return for the year of the cancellation, and in exchange you reduce certain tax attributes (such as net operating losses or the basis of property) by the excluded amount.12Internal Revenue Service. Instructions for Form 982 If you receive a 1099-C connected to this case, talk to a tax professional before filing.