Foreclosure and Homeowner's Insurance

[DivorceRuinedMe]

I am filing a chapter 7 but not until October at the earliest. This month (April) was the first month I did not make my mortgage payment. I am no longer living in the house (I received it in my divorce settlement but cannot keep it for various reasons. I haven't lived there in almost a year - the ex was living there and has since moved out.)

I got a letter from the insurance co. that I needed to cancel the policy if the house in question was no longer my primary residence (they found out it wasn't my primary residence anymore due to mail forwarding from the PO). I called the atty that I've been talking to and he said to just go ahead and cancel the policy. He said there is no need to keep it if I don't plan to live there and if anything does happen on the property, I can just include it in the bankruptcy when I file. I'm not sure if he remembered that I was waiting so long to file though. He has forgotten this in the past when I've talked to him.

Now my question is this. Because I am filing so far in advance, should I just do nothing with the homeowner's insurance right now? I am trying to avoid getting judgements against me in the time period between now and when I file (As of this month, I was up to date on all my debts). I don't want to call and cancel the policy and then they will send a notice to the mortgage company that I cancelled and then I may have them on my back ahead of when they normally would be.

What are the ramifications of not paying the insurance (it's escrowed in the mortgage payment). Is it really nothing I should be concerned about b/c won't it just get included in the BK as one of my "creditors"? I feel like such an idiot lately b/c I waiver so much on these stupid decisions. I'm usually so confident in myself but lately, I just feel so dang stupid.

I just don't know what to do and I really can't call this attorney that I've been talking to anymore b/c I just found out from the last time that I talked to him that he can't represent me in the area that I'm moving to. UGH - what a freakin mess!

ETA: My ex's name is on the insurance policy too (although he's NOT on the mortgage). In our divorce settlement, we agreed not to not file bk on any debts that were jointly owned. If I don't pay this insurance policy, that will affect him now won't it? I don't have a great relationship with him but I don't want to cause him any stress that's not rightfully his either. So, now do I really even have a choice not to cancel the homeowner's insurance b/c my ex's name is on the policy too?

[emoney]

If you elect not to insure your home you are in violation of you deed of trust or security agreement you signed at closing. Your lender will put insurance in force to protect their interest in your home they have as a lender.
I would suggest a different approach on your home. First why not try to sell it now and avoid the foreclosure and other issues.
If you do not want to do that why not rent if until you lose title.
If that is not good for you then contact your lender and transfer title to them as soon as possible.
Nothing for either party is gained by leaving a house vanant for six months. Think of your former nieghbors and their issues with a vacant house and what that will do to the area.
regards,
emoney

[DivorceRuinedMe]

I've tried to sell it. The market is DEAD! I can't sell it. I just got whacked with a HUGE increase in property taxes (it was a newly constructed house and the taxes were not estimated properly for the escrow nor could they have been according to the title company). I also got whacked with a HUGE insurance rate increase (my premiums DOUBLED!). So, my nice little mortgage payment jumped $500 per month to cover the escrow shortage, the increased tax amounts and increased insurance premium.

I couldn't find anyone to rent it at what I need to get per month and even if I did take a loss on it each month, then I would have to deal with getting someone out of the house when it does get foreclosed on. I do not want to be in that situation again. Plus, I now live 2 hours away from that property so me being a landlord again just isn't feasible. Plus, I have 2 children (2 and 3 months) and I just don't have the time to be dealing with nasty tenants. (I was a landlord before and I HATED it!)

So, what are my other options then to give it back to the bank asap knowing that I cannot pay for it and am no longer living in it? I need to do what's best for me and not the bank or my neighbors at this point. And as selfish as that sounds, it is what it is when you have 2 babies to think of.

[emoney]

I also believe in what goes around comes around. You are not the first person who bought a house before they were ready for the obligations. I have a daughter and new husband that got hit with increased property taxes on a new home. The builder and mortgage company should have told you, but you are still have the primary responsibilty.
I can only give advice on what would I do and that is contact mortgage company today and describe the situation. You have nothing to gain in waiting.
thanks,
emoney

[DivorceRuinedMe]

Thanks emoney for taking the time to respond to my questions. I just am afraid that if I don't wait, and I call them say today, they will start the whole foreclosure process faster and then sue me and issue a judgement against me before I file for the bankruptcy. This will in turn cost me more money to get fixed (according to my attorney). He said that if I can file the bk before any of the lenders come after me that it will be much better, faster and cheaper for me. This is why I'm hesitant to call them. (And I cannot file until October at the earliest due to skewed income in the month of March).

[SinkingFast]

BK attnys told us as we were Consulting around to keep our house insured. That was to protect us against liability as long as the property was in our names.

If some one walks onto the property, slips, falls, and breaks a leg, they can hold you responsible. So maybe you want to seek out a different type of insurance other than a traditional Homeowner's Policy that will protect you in case something like that were to happen.

The taxes,........... The local tax authorities will probably tack a tax lien against the property. Since the house is going into Foreclosure, it generally falls to the Lender to take care of clearing up the tax situation. The Lender will have to do that in order to get a free and clear Title/Deed to sell the house to anyone else.

When a house goes in Foreclosure, the Lender usually pays for repairs and marketing costs. Maybe clear up a tax lien and possibly catch up HOA dues arrears. In addition to the costs of the Foreclosure and subsequent marketing of the home.

[demismom]

WE were told to NOT let our insurance policy lapse, ours is rented. Even if it weren't though, the advice is the same. You ARE liable until someone else's name is on the title for everything that could happen at that house liability wise.

[DivorceRuinedMe]

What the atty told me is that if something did happen at that house that if they sued me it would just be included in the bankruptcy. What am I missing?

And how do I contact the insurance company to find out how far in advance it's been paid without them asking me a zillion questions about my address. Do I lie to them and tell them that I'm still in the house?

[pambysue]

I was in the same predicament as you. I moved out and they are foreclosing on my house. My attorney had said that I should keep the insurance on my house so that if anyone gets injured and sues, it will be taken care of. He had said if I didnt, they could sue down the road, after the BK was discharged and it wouldn't be good! However, due to financial circumstances, I couldnt afford to pay it and it was cancelled. My foreclosure sale was postponed from April 6th until April 20th and God only knows if it will be postponed again. I am just holding my breath and hoping that nothing happens before its all over and done with. I have not filed my BK yet, so if anything DOES happen, I hope I can include it in my BK. If not, I will just have to deal with it and move on. I swear I never want to be a single mom, homeowner again. It is way too stressful. I'll just be glad when the house is gone and my BK is over (sometime this summer).
Good luck to you & your family

[emoney]

I understand you need to "time your filing" for October or later. Do you not think they do not know what is going on by now? Your divorce is public information. The house is vacant, as you can see that from the street, and they know that you have moved.
In your discussions with your lender, if you cannot work out something that is good for both of you, then let them foreclosure. They may want to do that anyway to erase any other claims against your property. That is what I would do and I have been in the mortgage business for about 40 years.
That will take from 90 days to over 360 days depending on the state where your home is located. Only after that can they get a judgement if there is a shortfall from sales proceeds.
Getting insurance on a vacant house with bad credit can be hard and very costly; some would say imposible.
If there were a claim from a accident is not an issue, as your BK filing would discharge it.
I hope this helps, as this is what I would do if I was in your shoes.
emoney

[SamanthaJones]

A lawyer told ME to simply stop paying the insurance on a rental.

And he said it was as simple as that- stop paying anything connected to it.

[DivorceRuinedMe]

ACK - this just stinks. I have advice from y'all and it is conflicting. Don't know what to do. I'm in such a bind about this.