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Can hurricane damage affect a bankruptcy case?

Each bankruptcy case is different, so it is impossible to generalize whether hurricane damage to your home, car and/or other assets may affect your case. That said, in many cases, hurricane damage does affect something.

Here is an example. Say that you are in Chapter 13 bankruptcy and had reorganized to keep two properties, one of which you rent out. However, a hurricane has now nearly demolished that rental property, and insurance covers only half of the necessary repairs. Further, because of the bankruptcy, you cannot get a loan to cover what the amount left over. In such a scenario, you may have to return to court to modify your Chapter 13 plan.

Immediate loss of disposable income

One way in which hurricane damage can affect a bankruptcy case is that it impacts your disposable income. Perhaps you simply cannot work for the time being or already had very little income left over every month after paying bills and expenses. Now you have even more expenses as you try to repair the damage or replace property. In addition, your insurance payments may increase, further straining your lean budget.

Home sales called off

In some bankruptcy cases, the court gives permission for the sale of a home. For example, maybe you are selling to move into a smaller home. However, when a hurricane destroys your current home before the sale closes, that obviously can affect a bankruptcy proceeding. You may get some money from FEMA down the road, but it likely will not be equivalent to what you would have gotten from the sale.

Take action as soon as possible

The bottom line is that you should contact your attorney as soon as it is safe to discuss the hurricane's possible effect on your bankruptcy case. If you do not have a case but have been considering bankruptcy, now is a good time to get in touch with a lawyer. The two of you can figure out how to navigate the property damage and how bankruptcy may help.

 

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