The LA Wildfires and Your Chapter 13 Bankruptcy

The recent Los Angeles wildfires have been devastating. The fires have destroyed entire communities, and many people are now essentially homeless. As fires continue to rage and smoke chokes the sky, it’s difficult to fathom how much time and money it will take to rebuild. Many people are simply trying to get from one day to the next. This has been a tragic experience.

Natural disasters affect everyone in California, but anyone in the middle of a Chapter 13 bankruptcy is especially hard hit. Suddenly, your well-crafted repayment plan can be thrown into doubt. Call Resolve Law Firm if you are considering bankruptcy or already have a Chapter 13 in motion. OurLos Angeles bankruptcy attorney is eager to hear your story and help you determine what steps to take next.

Lighting a Fire to Your Chapter 13

A Chapter 13 is a wage earner’s bankruptcy. Instead of wiping out debts in one fell swoop, debtors pay off debts over a 3–5-year period based on their disposable income. This bankruptcy takes a while to complete, but wage earners like it because the trustee will not sell any of their property, in particular their home.

Unfortunately, a lot can go wrong in 3-5 years. If for any reason you cannot keep up with your payments, you might end up losing your property.

The recent L.A. fires have destroyed hundreds of homes. Even those homes which are not completely destroyed will need expensive repairs to become inhabitable. Debtors who are working through a payment plan face challenges getting their home fixed.

Ideally, you will have homeowners’ insurance, but even those with insurance can face obstacles:

1. Some insurance policies come with exclusions for fire damage. That means you won’t get any payment if your home was damaged by fire.
2. Your deductible could be huge, and you must pay the deductible before your coverage kicks in.
3. Some damage is so extensive that repairs will exceed your policy, so homeowners are left paying out of pocket. Some people have more than $100,000 in property damage which is not covered.
4. Getting an insurance payment often takes time. Many insurers drag their feet after natural disasters. In the meantime, you need to pay for a place to stay, such as a hotel room or apartment, which only adds to the financial distress.

Your Income is Tied Up in Bankruptcy…Now What?

With most Chapter 13 repayment plans, all income is dedicated to creditors. There is literally nothing left over to pay for a night out at the movies or a small weekend getaway. Likewise, there is no money budgeted for home repairs after a devastating fire. Instead, all income is going to your creditors, and you might have no savings. What can you do?

One reality is that you have no way of fixing your home. A debtor could be forced into the following options:

1. You might need to modify your Chapter 13 bankruptcy and surrender your house. This is a devastating choice, but it might be the only option if you do not have resources to fix your home. If you just stop paying on your chapter 13 repayment, then the trustee will go into court and ask the judge to dismiss your bankruptcy.
2. You might ask the trustee for permission to skip payments for a little while. You can then use the money to fix your home. However, many people are struggling with massive damage, and skipping a few payments won’t really help them. A trustee is unlikely to let you stop paying for years, even if your home is damaged in the wildfires.
3. Depending on the damage, your house might be condemned, and you could qualify for a buyout. This is an ideal situation for many homeowners, but there’s no guarantee you are getting a buyout.

Even if you receive insurance proceeds, the bank might not release the money because you are currently in bankruptcy. That’s one more headache to deal with at a vulnerable time.

We encourage homeowners to reach out toResolve Law Firm to speak with a Los Angeles bankruptcy attorney about your case. We can help people who are struggling in the aftermath of any natural disaster, whether related to the recent wildfires or related to flooding, tropical storms, or other disasters.

Considering Your Options

Few people enter Chapter 13 expecting a natural disaster to destroy their home. But life is full of unexpected turns. If you have suffered a devastating loss, you have our condolences.

You should also reach out to consider your options. We can discuss whether it’s likely the trustee will let you skip payments to save up money for home repairs. We can also handle any modification to your repayment plan.

Of course, if you haven’t already filed for bankruptcy protection, then you might switch and decide to file for a Chapter 7 protection. This is an easier way to eliminate certain debts, such as credit card debt and personal loans. Those might make up the bulk of your debt pile, so filing for Chapter 7 could make sense.

Some debtors might be forced into Chapter 7 without any choice. After all, the recent wildfires have damaged many businesses, too. If you are not earning a regular wage, then you might not qualify for a Chapter 13 in the first place. Instead, a Chapter 7 might be the only option for obtaining bankruptcy relief. Let’s walk through the different options, including non-bankruptcy options.

We Are Here for the Los Angeles Community

Resolve Law Firm is proud to help the Los Angeles community with their bankruptcy needs. The recent wildfires have upended lives. Many people have been working hard to get on track and keep up with Chapter 13 repayments. Call our office to schedule a free, no-risk consultation. It doesn’t hurt to find out about your options for getting out from under crushing debts after a natural disaster. Based on what we hear, we can advise whether bankruptcy or a different option is the correct path forward.