How will the new bankruptcy law affect those who lost everything in Katrina? [Archive]

Miles

09-05-2005, 02:33 AM

Will they still owe for their property lost if they claim bankrupty under the new law?

I hope for their sake the law is in the avg citizens favor under such circumstances.

Im hardly a bankruptcy expert but im pretty sure that secured mortgages were dischargable before the new code got put in place. Just that the homested exemption prevented the sale of the home due to the mortgage and that exemption got changed some (by $$ amount).

rockchalkgirl

09-05-2005, 07:29 AM

A couple of thoughts...

First, many of the new provisions that make it more difficult to get a discharge under Ch. 7 only kick in if the debtor's income is above the median for that state. The debtor may still have to have the debt counseling, but may be able to avoid the "stong-arming" into Ch. 13.

I believe that all states now have the same homestead exemption limit, which is $125,000. Previously, there was no limit on the homestead exemption in certain states, including Kansas. This particular piece of the new code went into effect in July, anyway.

memyselfI

09-05-2005, 11:54 AM

Excellent question.

I think this law change along with the recent eminent domain ruling spell a 1-2 punch for these folks. From what I understand, under the eminient domain law, they will not get the true value of their property because the values have decreased due to lack of infrastructure, property damage, and/or condition of the dwelling. I can't imagine the government or developers giving these folks the pre-storm value for their property thus these people will only get a fraction of what their propery might have been valued. The irony is that property value will sky rocket once new infrastructure and developers start going into the region and building flood proof levies and structures.

And those going in to rebuild are not going to be rebuilding for the displaced lower to low-middle class, they will be going to rebuild for the big bucks and those who have them.

Brock

09-05-2005, 12:01 PM

Bankruptcy isn't filed for lost property. The question makes no sense.

If you lost your home, that's between you and your insurance company. The government has nothing to do with it.

Kylo Ren

09-05-2005, 12:13 PM

I"m sure some sort of provisions will be made to help them out.

KC Jones

09-05-2005, 12:17 PM

Bankruptcy isn't filed for lost property. The question makes no sense.

If you lost your home, that's between you and your insurance company. The government has nothing to do with it.

Homeowners should be able to get insurance money eventually. Of course their homes are only insured for the mortgage plus a little extra for household goods. Odds of the policy holders having good documentation on what household goods were lost is nil. Any amount their home has increased in value since they last updated their homeowners insurance policy is gone too. I think it's pretty safe to say with the whole city shutdown that nearly everybody lost their jobs. Many of these people will be using up any savings they had to get back on their feet - in New Orleans or another city. Most will go deeply into debt.

So, getting back what you owe on your mortgage is nice but I wouldn't be surprised to see a whole lot of these folks go really deeply into debt trying to put their lives back together.

DTLB58

09-05-2005, 02:19 PM

How about this ?

Since N.O. was below sea level were all the houses covered by insurance, especially flood insurance???

rockchalkgirl

09-05-2005, 02:46 PM

I would hope so, DTLB. In many parts of the country, it is an additional rider that you have to purchase to have flood coverage. It seems like it should be automatic there, doesn't it? Anyone in the insurance business that can comment?

Of course, none of that will help the people that were renting and didn't have renters' coverage, or the ones that tried to save a buck and therefore were hopelessly under-insured.

Bankruptcy may be the only out for the people that have to live off credit cards for a few weeks while finding a job elsewhere. Keep in mind, too, that for secured debt where the creditor is undersecured, (i.e., many car loans) insurance will not help, because it won't pay enough to pay what is owed on the loan, let alone giving the debtor any $$ for a down payment on a new vehicle.

JOhn

09-05-2005, 02:54 PM

I"m sure some sort of provisions will be made to help them out.
:thumb:

I heard on the radio this am, that they were going to suspend implementation of the new laws for those hit by the hurricane.

memyselfI

09-05-2005, 03:06 PM

:thumb:

I heard on the radio this am, that they were going to suspend implementation of the new laws for those hit by the hurricane.

And how will they decided who was 'hit' if this ends up impacting the economy on a wide basis?

Brock

09-05-2005, 03:08 PM

It's a bad decision. Like extending unemployment benefits, all it does is encourage irresponsible behavior.

Logical

09-05-2005, 03:15 PM

Bankruptcy isn't filed for lost property. The question makes no sense.

If you lost your home, that's between you and your insurance company. The government has nothing to do with it.

Brock I know in certain cases post earthquake where the property could not be rebuild do to instability of the underlying earth bankruptcy was an option. For many of these folks pollution etc will make their former property not occupiable and therefore it made me think of this question. Insurance does not cover earthquakes and I think it might not cover Hurricanes either.

memyselfI

09-05-2005, 03:20 PM

Brock I know in certain cases post earthquake where the property could not be rebuild do to instability of the underlying earth bankruptcy was an option. For many of these folks pollution etc will make their former property not occupiable and therefore it made me think of this question. Insurance does not cover earthquakes and I think it might not cover Hurricanes either.

From what I understand, insurance might cover the hurricanes but not the flooding if you are in a flood prone region. So while it might cover damage to a roof that was wind blown it might not cover the house being submerged under water without the flood insurance. In the case of N/O it was a flood and not the hurricane that damaged many of the houses. At least that is the game that the insurance industry will try to play.

I understand Federal Insurance (I think through FEMA) is available to flood prone areas and many folks don't have it.

Demonpenz

09-05-2005, 03:20 PM

We well flood policy's but its not filed through your homeowners have seen some endorsements that say hurricane %1 lately so I don't know exactly what that means because I haven't asked. Some things i do know is we are setting some people up with additional living expenses for the apartments they are staying in. People are calling up knowing they probably won't see their house again.

Demonpenz

09-05-2005, 03:22 PM

From what I understand, insurance might cover the hurricanes but not the flooding if you are in a flood prone region. So while it might cover damage to a roof that was wind blown it might not cover the house being submerged under water without the flood insurance. I understand Federal Insurance (I think through FEMA) is available to flood prone areas and many folks don't have it.

if you had home owners you would still get some ALE, but that post sounds about right.

Brock

09-05-2005, 03:24 PM

If you build your house on a flood plain, it's probably a good idea to purchase flood insurance.

Logical

09-05-2005, 03:32 PM

If you build your house on a flood plain, it's probably a good idea to purchase flood insurance.I agree with you if it is better than the Earthquake insurance offered by the government. Get this you can pay depending on the value of your house of course approximately 3000 a year for which the government will reimburse you 25% of the value of your property if an earthquake occurs. Top notch insurance I tell you.

KC Dan

09-05-2005, 03:37 PM

Being married to an Insurance agent, I can tell you that insurance is a huge scam! If I had a choice between shooting an insurance agent or a lawyer, I'd have to flip a coin. They are both working to bury the common man in this country. Flood insurance is so expensive and has usually has a ton of limitations on collection. I was hit by Hugo in Charleston and took some good wind an water damage. The flood insurance I carried was almost worthless. I got more from the feds. Just my experience.

Valiant

09-05-2005, 04:25 PM

It's a bad decision. Like extending unemployment benefits, all it does is encourage irresponsible behavior.

No, thats not true... It is a equalizer, why should people with jobs get all the money... ROFL

penchief

09-05-2005, 04:33 PM

What about just the fact that so many people are not only going to lose their property but also their income? A lot of people flat aren't going to be able to pay their bills.

KC Dan

09-05-2005, 04:37 PM

What about just the fact that so many people are not only going to lose their property but also their income? A lot of people flat aren't going to be able to pay their bills.
Unfortunately, that is what the Bankruptcy laws are supposed to be there for. I hope that the Labor Sec'ys little job plan will be expanded to assist those there to find work to help them out as well as FEMA $$$'s. There will be a lot of reconstruction work available there as well. The citizens affected will surely have a tough road to hoe, that is for sure.

penchief

09-05-2005, 04:48 PM

Unfortunately, that is what the Bankruptcy laws are supposed to be there for. I hope that the Labor Sec'ys little job plan will be expanded to assist those there to find work to help them out as well as FEMA $$$'s. There will be a lot of reconstruction work available there as well. The citizens affected will surely have a tough road to hoe, that is for sure.

Meanwhile the banks and credit card companies get rich from obscene interest rates and equally obscene "double-dipping" late fees. This country has turned the corner. It no longer represents the people... but the power-quo, wholeheartedly.

Brock

09-05-2005, 04:49 PM

Meanwhile the banks and credit card companies get rich from obscene interest rates and doubly obscene "double-dipping"l late fees. This country has turned the corner. It no longer represents the people... but the power-quo, wholeheartedly.

If there weren't stupid people who abused them, credit card companies wouldn't be in business. How about we lay the blame where it belongs for a change?

stevieray

09-05-2005, 04:51 PM

Meanwhile the banks and credit card companies get rich from obscene interest rates and doubly obscene "double-dipping"l late fees. This country has turned the corner. It no longer represents the people... but the power-quo, wholeheartedly.

This country turned the corner a long time ago. We're here. We aren't going back.

stevieray

09-05-2005, 04:52 PM

If there weren't stupid people who abused them, credit card companies wouldn't be in business. How about we lay the blame where it belongs for a change?

"The chief cause for unhappiness and failure is trading what we want most for what we want at the moment"

penchief

09-05-2005, 05:02 PM

If there weren't stupid people who abused them, credit card companies wouldn't be in business. How about we lay the blame where it belongs for a change?

Fair point. But an equally fair point would question why credit card companies push cards on kids like the tobacco companies push cigarettes on them.

Face it. The fact that some people abuse credit cards pales in comparison to the way banks and credit card companies exploit the consumer. They see the consumer as a market in which recent legislation has created an environment akin to fishing in a barrel.

The banks and credit card companies are no different or no better than the oil companies, the pharmaceutical companies, or the insurance companies. They are all crooks who take more than what is reasonable because they can. And then they set up a gauntlet for those who want to fight back.

The phone companies are great at this, too. Ever try to contest a bogus charge with a phone company? 45 minutes later........

Gouging is the current culture of corporate America in this country. And that culture has been enhanced and promoted by the Cheneyburton Administration, as well as pro-business members of congress.

It's a shame, really.

JMO.

penchief

09-05-2005, 05:05 PM

"The chief cause for unhappiness and failure is trading what we want most for what we want at the moment"

I agree. If you only knew how much time I have spent preaching to my daughter about this very same thing. It doesn't help that there are entities out there that our trying to lure our young ones into that trap for their own greedy reasons. Especially when such exploitation is encouraged by our government.

Brock

09-05-2005, 05:10 PM

Fair point. But an equally fair point would question why credit card companies push cards on kids like the tobacco companies push cigarettes on them.

Why shouldn't they? You act as if usury is illegal. It isn't. I personally love credit cards. I get to use someone else's money for 30 days, and if something goes wrong with the purchase, I have a built-in attack dog.

High schools have lately made personal finance courses available, and the first thing they teach you is "If you can't pay cash for it, you can't afford it". I don't feel sorry for people who won't live by that rule.

Logical

09-05-2005, 05:17 PM

"The chief cause for unhappiness and failure is trading what we want most for what we want at the moment"I usually enjoy a good thread hijack but this thread has diverted so far from my intent I would like to remind everyone that the question is will the bankruptcy laws still protect those who it was designed to protect. No discernable source of income, complete loss of property and no forseeable relief in the reasonable span of years for the future.

stevieray

09-05-2005, 05:18 PM

I agree. If you only knew how much time I have spent preaching to my daughter about this very same thing. It doesn't help that there are entities out there that our trying to lure our young ones into that trap for their own greedy reasons. Especially when such exploitation is encouraged by our government.

we allow ourselves to be exploited.

stevieray

09-05-2005, 05:19 PM

I usually enjoy a good thread hijack but this thread has diverted so far from my intent I would like to remind everyone that the question is will the bankruptcy laws still protect those who it was designed to protect. No discernable source of income, complete loss of property and no forseeable relief in the reasonable span of years for the future.

my post wasn't "responsible". why did you pick it?

Has your question been answered?

Bwana

09-05-2005, 05:29 PM

"The chief cause for unhappiness and failure is trading what we want most for what we want at the moment"

Great point Steve. :thumb:

Logical

09-05-2005, 05:30 PM

my post wasn't "responsible". why did you pick it?

Has your question been answered?Actually it has not, I am hoping one of the lawyers on the BB like Ammorix can give us a definitive answer.

I randomly picked a post, I don't think I said anything offensive to you or directed directly at your comment. Just pointed out that I am still hoping for an answer. I hoped to stop this drift because it was taking the thread towards DC where I did not intend for it to belong.

go bo

09-05-2005, 05:33 PM

i haven't read the actual statute, but based on news reports, i don't think the new provisions would affect any poor people...

and somebody said that they had suspended the new rules for the disaster victims (but i haven't seen that in the news yet myself)...

i'm not sure how an act of God would affect secured contracts (like real property, car loans, etc.)...

vlad, maybe jettio or somebody will come by and give you a more accurate summary of how the new law would affect disaster victims, if at all...

stevieray

09-05-2005, 05:36 PM

Actually it has not, I am hoping one of the lawyers on the BB like Ammorix can give us a definitive answer.

I randomly picked a post, I don't think I said anything offensive to you or directed directly at your comment. Just pointed out that I am still hoping for an answer. I hoped to stop this drift because it was taking the thread towards DC where I did not intend for it to belong.

I didn't take it as offensive, I wondered why you picked my post when penchief brought the government into the discussion, considering your desired result was too keep it from being moved. Aren't most of the lawyers over there more, anyway?

thanks for the explanation.

Logical

09-05-2005, 05:50 PM

Logical

09-05-2005, 05:52 PM

I didn't take it as offensive, I wondered why you picked my post when penchief brought the government into the discussion, considering your desired result was too keep it from being moved. Aren't most of the lawyers over there more, anyway?

thanks for the explanation.My concern was not the government discusion as much as the personal responsibility for debt issue that had arisen. That is a fine topic for a thread but it really does not relate to people who have lost everything to a natural disaster.

stevieray

09-05-2005, 05:55 PM

My concern was not the government discusion as much as the personal responsibility for debt issue that had arisen. That is a fine topic for a thread but it really does not relate to people who have lost everything to a natural disaster.

Discussing personal reponsibility of debt will get this topic moved to the DC forum??

Logical

09-05-2005, 07:54 PM

Discussing personal reponsibility of debt will get this topic moved to the DC forum??You can bet on it. I should not even have to point out how the split on that argument will go, right down the usual lines with the usual suspects on each side.

stevieray

09-05-2005, 07:58 PM

You can bet on it. I should not even have to point out how the split on that argument will go, right down the usual lines with the usual suspects on each side.

I don't think so jim, personal responsibility is a learned behavior, not a party affiliiation. Most people believe in personal responsibility.

Mosbonian

09-06-2005, 03:53 PM

I haven't heard that they were suspending the implementation of the law.....and I don't believe that it makes sense to.

When it comes to "secured" transactions, the losers will be the lienholders....let's say that the Joe Smith has a $100,000 home, with a balance of $75,000 left to pay. The Insurance company, wielding powers, manages to convince everyone that due to the decline in value of the property, they only have to pay Joe Smith $65,000. (This assumes that Joe Smith didn't purchase "replacement value" insurance that was once available to homeowners)

Joe Smith tells the mortgage company that all he can pay is the $65 large and that the balance will have to become part of debts that are associated with the Bankruptcy estate....here's where the rub is....depending on where you are, some Bankruptcy judges will rule that the remaining balance becomes an "unsecured debt" and the lienholder gets in line for his balance with all of the rest of the unsecured creditors. An different Bankruptcy Judge might rule it a "deficiency balance of a secured debt" and force the Debtor to pay that back out of the proceeds of the Estate.

All that Katrina did for those that are in the bankruptcy arena is ensure that they will have lots more work, set new precedents, and make LOTS OF MONEY.

mmaddog
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rockchalkgirl

09-06-2005, 04:49 PM

Mosbonian

09-06-2005, 08:31 PM

mmaddog,

That "deficiency balance" creditor is only going to get paid out of the assets of the estate, and I'd be willing to bet that most of these will be no asset cases. I would venture that the only asset would be the income tax refund of the debtor, and that is easy to fix by changing the debtor's withholding.

rockchalk:

If the debtor files Chapter 13 (Consumer) or Chapter 11 (Business) it's not that easy. I am guessing that not all will file Chapter 7....

mmaddog
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