If you’re thinking about Chapter 13, it’s important for you to know that your real property (real estate) must be insured. Increasingly, I am finding that homeowners are allowing their policies to lapse. This poses a problem – especially for debtors who wait until the last minute to file.
If real estate is not insured, this will pose problems for any debtor hoping to reap the benefits of Chapter 13. It’s also important to know that not only is insurance required, but a Massachusetts Local Bankruptcy Court rule mandates that evidence of insurance be filed with the Bankruptcy Court along with the petition. If it is not filed, the Court can dismiss the case.
Sometimes, the mortgage payment also includes an amount that’s held in escrow for taxes and insurance. When a homeowner stops making monthly mortgage payments, the lender may – or may not – continue paying taxes and insurance. If the lender doesn’t pay the insurance, the lender will obtain Force Place insurance. This policy protects the lender. It does not protect the homeowner, the homeowner’s family, or the contents of the home and it is not acceptable for Chapter 13 purposes.
If you’re contemplating a Chapter 13 – check on the homeowner’s insurance. Be sure it is current and up to date. Be sure that the premiums are paid. Be sure that any special riders that you want are included, such as special protections for jewelry, electronics, and other items. Keep those documents handy and in a safe place – because you will need them if you’re thinking about filing Chapter 13. The time to do this is now, not on the eve of a foreclosure auction – which will only cause delay, increase anxiety and perhaps even be more expensive.
Related posts:
- Mass. Bankruptcy Judge Rules Trust Property Is Chapter 7 Estate Property
- Walking Away from the Mortgage and the Home? Consider this…
- 10th Circuit: Legal Interest Acquired Post-petition is Property of the Estate
- Changing Chapter 13: Some Facts on the “Pandora’s Box”
- ‘20 Months Too Late’: Let’s Start Rethinking Mortgage Modifications in Chapter 13
Tags: Chapter 13, Homes, homesteads and real estate, Modifications and Workouts