No Flood Insurance and Bankruptcy

No Flood Insurance and Bankruptcy

Despite the number of floods that affect homeowners every year, the majority of Americans don’t have flood insurance coverage.

Making matters worse, many don’t realize that homeowners insurance doesn’t cover flooding in most cases. They assume they are covered in the case of a natural disaster, like the recent Hurricanes Harvey and Irma, or for any other catastrophic event that leads to flooding. It isn’t until their lives are in disarray and their homes are underwater that they realize they have no insurance coverage for flooding.

It’s bad enough that you lose your home and everything in it, but to learn that you have no protection and no way to recover your losses makes the situation even worse.

Options for Homeowners without Flood Insurance

So what can you do after a catastrophic flood if you have no insurance coverage?

Your situation isn’t ideal, but at least you have a few options. And before you move forward with any resolution, it’s important to understand all of your options and how what you do in the days, weeks, and months following a flood can affect you in the short- and long-term.

Loan Programs are Available

In some cases, you’ll have the option of applying for a loan to help you through this difficult time. Many of these loan programs are government backed. One the most popular loan programs utilized after Hurricane Katrina and Superstorm Sandy was sponsored by the US Small Business Administration and gave people access to low-interest loans. Unfortunately, these loan programs tend to be slow and include a great deal of red tape – something you don’t have time for if you’ve recently lost your home and you’re facing a financial crisis.

In addition to seeking loan assistance, it might also be possible for flood victims to receive FEMA assistance to help them with their mortgage if they’ve received a foreclosure notice that resulted from disaster-related financial hardship.

Bankruptcy Instead of Loans

There are a number of reasons why a loan wouldn’t help you if you’re a flood victim without flood insurance. For starters, many of the loans are not enough to pay off a mortgage on a home that’s uninhabitable. And even if the amount is enough to help, if it takes months or years to become available it isn’t going to do much good.

There have been some programs enacted after natural disasters to help homeowners regarding their mortgages. Hurricane Harvey victims were given reprieve when foreclosures were halted temporarily after the storm. At the very least, this buys some time when you’re dealing with a difficult situation and you need to explore your options before making a decision.

In many cases, the best option is going to be filing for bankruptcy.

Obviously, many people considering bankruptcy after a natural disaster weren’t struggling before the event. And even if they were, they were still far from filing for bankruptcy. But things can change in an instant and you can find yourself in a dire situation, especially if you’re dealing with the aftermath of a flood.

If you’re employed and you own a home, and your goal is to retain ownership of that home, you can still file for bankruptcy. As a matter of fact, Chapter 13 bankruptcy can help you stay in your home while also getting financial relief.

Chapter 13 allows you to propose a payment plan for your mortgage and other debts, even if you’ve fallen behind on your mortgage because of the flood. Filing for Chapter 13 is a commitment – you’ll be in your payment plan program for three to five years – but it can be a good option for homeowners affected by a major flood. It’s one of the tools available to flood and natural disaster victims and it’s important to consider it if you find yourself in this position.

It’s also possible to file for Chapter 7 bankruptcy after a flood. This can be especially helpful to homeowners without flood insurance who have homes so damaged they’re unable to return to them. The last thing you want is to be stuck paying a mortgage every month – or unable to afford the monthly mortgage payments – on a home that’s doing you no good. Unfortunately, it’s the nightmare many people find themselves in after a flood.

What If Your Flood Insurance Didn’t Help?

The sad fact is that even those with flood insurance are suffering. Many storm victims report nothing but hassle when they attempted to make claims. Following Superstorm Sandy, many people were denied coverage or given less compensation then they deserved. The same has been true in other natural disasters.

Recent catastrophic events have revealed dysfunction in the flood insurance industry and it’s those who purchased flood insurance who are suffering. Even with flood insurance, bankruptcy could still be a viable option to help you through this difficult time.

If you’ve recently been affected by Hurricane Harvey or you’re dealing with the fallout from any other natural disaster, it’s important you know you have options. What works for someone else might not be right for you, or through no fault of your own, you could find yourself facing difficult challenges, including the loss of your home through foreclosure.

Whether your intention is to retain ownership of your home or you’re facing a total loss because of flood damage, bankruptcy could help you make a bad situation a little bit better. The average homeowner has no flood insurance coverage, so you aren’t alone. And even those that do have flood insurance might need additional help.

Before you move forward with any decision, make sure you under the benefits offered by bankruptcy. It could be the right solution for you.

If you’d like to know more about what you can do to deal with the damage caused by a catastrophic natural disaster, or you’re wondering whether bankruptcy will help you during this difficult time, we’re here to answer your questions. To learn more or to discuss your options, contact us at 1.800.220.4318 to schedule a consultation.