Homeowner's Insurance Claim and hiccups..

[kmccoleman]

So I recently had a flood that damaged quite a bit of my home. Two levels of my home to be exact. According to the contractor it's about $20K minimum in damage. Needless to say that number is terrifying. In addition I've recently learned that as a lienholder my mortgage company would have to endorse any payment we received from the insurance company. Which puts a HUGE wrench in the repair plan because of the bankruptcy and the escrow being in the negative due to the bankruptcy.

Finally, is this something we have to inform the Trustee of? Since it is for repairs on our home, it's not actually disposable income, it's all going to home repairs. So I'm seven shades of confused. HELP!!

[justbroke]

Yes, you'll have to notify the trustee and, more importantly, your attorney. You'll have to use the proceeds to make the repairs. The court can be force the creditor to endorse the check. These things happen while in Chapter 13s. I've witnessed several of these myself and it all looked like a regular procedure for the court. Some of this could be more complex if your Chapter 13 hasn't been confirmed, but if you're in a confirmed Chapter 13 plan, the Trustee should not have any issues at all. It's getting the check endorsed by your creditor and making sure your repairs are completed. There are some shady contractors in Florida as there are probably some in Maryland. Make sure that you don't hand the contractor the entire amount at once. Make sure that the contractor isn't one that only accepts "cash" and check their reputation.

[kmccoleman]

Yes, you'll have to notify the trustee and, more importantly, your attorney. You'll have to use the proceeds to make the repairs. The court can be force the creditor to endorse the check. These things happen while in Chapter 13s. I've witnessed several of these myself and it all looked like a regular procedure for the court. Some of this could be more complex if your Chapter 13 hasn't been confirmed, but if you're in a confirmed Chapter 13 plan, the Trustee should not have any issues at all. It's getting the check endorsed by your creditor and making sure your repairs are completed. There are some shady contractors in Florida as there are probably some in Maryland. Make sure that you don't hand the contractor the entire amount at once. Make sure that the contractor isn't one that only accepts "cash" and check their reputation.

Well according to my mortgage company they have to endorse the check and depending on how much the check actually is, they would endorse and release or they would need a laundry list of requirements from the contractor before they would release the funds, etc. The confirmation hearing is supposed to be next Tuesday but I wanted to see if I needed to inform my attorney and the Trustee now before I even got the check. I have no idea how much the check will be and when it's coming. I just want to be prepared for whatever the requirements are before any of this starts.

[justbroke]

Yes, this is standard. The mortgage company, just as the Trustee and the bankruptcy court, wants the money to go to repairing the property itself. The repairs preserves the mortgage company's lien.

(Short Answer) Since you are not confirmed, you are falling under the pre-confirmation process. This means that you absolutely need to inform your attorney immediately. Your attorney will notify the Trustee to obtain approval. This may require a motion with the court.

(Long Answer) The reason for this is that upon filing, your home became property of the bankruptcy estate and vested in the estate and Trustee upon that filing. The home remains property of the bankruptcy estate and controlled by the Chapter 13 Standing Trustee until the earlier of the the property vesting back to the debtor, the case being dismissed, or the case closing, whichever comes first. Most Chapter 13 plans vest the home (property) back to the debtor upon confirmation. In some small number of cases, and for some very specific reasons, some plans will keep the property vested in the bankruptcy estate for protection.

[kmccoleman]

Yes, this is standard. The mortgage company, just as the Trustee and the bankruptcy court, wants the money to go to repairing the property itself. The repairs preserves the mortgage company's lien.

(Short Answer) Since you are not confirmed, you are falling under the pre-confirmation process. This means that you absolutely need to inform your attorney immediately. Your attorney will notify the Trustee to obtain approval. This may require a motion with the court.

(Long Answer) The reason for this is that upon filing, your home became property of the bankruptcy estate and vested in the estate and Trustee upon that filing. The home remains property of the bankruptcy estate and controlled by the Chapter 13 Standing Trustee until the earlier of the the property vesting back to the debtor, the case being dismissed, or the case closing, whichever comes first. Most Chapter 13 plans vest the home (property) back to the debtor upon confirmation. In some small number of cases, and for some very specific reasons, some plans will keep the property vested in the bankruptcy estate for protection.

Well I talked to my attorney and she said that it was whatever the lien holder's procedures are. I spoke to my mortgage company and got that information from them about their procedures and they said the bankruptcy wouldn't impact the claim to the insurance section. But I needed to confirm the amount of the check and that would directly impact how they endorse and return it to me. So another monkey wrench in the crap of my life. Why am I not surprised..

[justbroke]

There are lienholder procedures and then there are the bankruptcy procedures. My long response was related to the bankruptcy procedures and not how the lienholder (lender) wants to deal with the check.

I do not know why an attorney would not notify the Trustee of an insurance claim prior to confirmation. But, I'm not a practicing bankruptcy attorney... so... there's that! Technically, prior to confirmation, the home vested in the bankruptcy estate and the estate's trustee should know what's going on. Perhaps this is different in your district and why it makes some questions difficult to have a solid 100%-guaranteed answer.

[StuckinaRut]

We had a pending insurance claim at the time we filed. Our attorney disclosed the claim amount to the court and we never had any problems from the Trustee or Court.

[kmccoleman]

We had a pending insurance claim at the time we filed. Our attorney disclosed the claim amount to the court and we never had any problems from the Trustee or Court.

We're a week before the confirmation hearing. I don't know what the amount of the check is going to be because the estimate isn't done. I just know that my attorney is worthless and I don't want to screw something up because she doesn't know what she's doing. She told me to just go by the lienholder's procedures.

[kmccoleman]

justbroke I told you my attorney scrapes by with the bare minimum and gives me half ass answers. She told me she's never been in this situation before but she told me to follow the procedures of the lien holder. I honestly think she doesn't want to disclose any potential additional disposable income because she just wants this confirmed so I can get out of her hair. I've tried looking for the precedent online myself and Googling stuff but there's nothing specific about insurance claims, checks and chapter 13's I can find.

[justbroke]

She told me she's never been in this situation before but she told me to follow the procedures of the lien holder. I honestly think she doesn't want to disclose any potential additional disposable income because she just wants this confirmed so I can get out of her hair.

Maybe that's the problem... your attorney has never been in this situation. In this situation, it's probably always best to tell the Trustee. It's more a courtesy than anything else.

I agree that your attorney just wants this to go away (be confirmed)!

I've tried looking for the precedent online myself and Googling stuff but there's nothing specific about insurance claims, checks and chapter 13's I can find.

This would be procedural (written or unwritten) so you won't find any precedence.

[kmccoleman]

Maybe that's the problem... your attorney has never been in this situation. In this situation, it's probably always best to tell the Trustee. It's more a courtesy than anything else.

I agree that your attorney just wants this to go away (be confirmed)!

This would be procedural (written or unwritten) so you won't find any precedence.

I've never contacted the Trustee myself so I have no idea if I'm allowed if I have counsel. Plus I don't want to step on any toes or have any issues. Quite frankly, I just want this confirmed and done too. BUT..I don't want this biting me in the butt later on when the checks are issued and the procedures of my mortgage company go into place. I really just want to pay the contractor so I can get my house back. But because I'm 1. not confirmed yet 2. dealing with this attorney and 3. uneasy about the procedures and so is she, I'm kind of stuck.

[justbroke]

You should never contact the Trustee yourself except in extreme emergencies (such as you can't contact your attorney). The Trustee's office should always send you back to your attorney (if you are represented).

You're still waiting on the check, so the not being confirmed is not on your critical path. Ask your attorney to notify the Trustee as a courtesy only that there was damage and that the insurance is being paid to make repairs. You should not be worrying about the procedures... as that is why you pay your attorney. The reason to be above board with the Trustee is for all the reasons I listed earlier. Your attorney should, if they don't even understand the procedure, find out the process! If you have to nudge your attorney into at least notifying the Trustee... let it be.

[despritfreya]

Has the mortgage holder's attny put in a Notice of Appearance? If "yes" then have your attny discuss with the lender's attny. However. . .

The funds should be held in trust for the benefit of the contractor. Typically (at least in my area) they are held by the insurance company and released upon the submission of draw applications by the contractor as work progresses. Insurance companies work hand-in-hand with contractors all the time. Not sure why this is so difficult. How would this be done if there were no bk? Talk to your insurance agent. IMHO this is not really a bankruptcy issue.

Des.