Lender Force-Placed Insurance on Homestead
While in Chapter 13 Bankruptcy, you are required to provide adequate protection on all secured property that has lien holder such as mortgage. The mortgage company can file a motion for relief for adequate protection even if you are current on your post petition mortgage payments. Your bankruptcy attorney will request proof of insurance coverage from the debtor to resolve this matter. In some cases the lein holder will require proof of prepaid policy for 6 or 12 month term to ensure coverage can not cancel due to missed payment on a payment plan.
If you have an mortgage loans that escrows for homestead insurance then your mortgage company will pay to keep the home adequately protected for the term of the loan. If you mortgage loan does not escrow for homestead insurance then you make sure that your insurance premiums are paid current without any lapses in coverage. In some cases, if you fail to stay current with your homestead insurance premiums then your insurance carrier will send a notice of cancellation to the mortgage company. Your mortgage company will either pay the premium or place lender forced insurance on your homestead. This allows the mortgage company to then escrow your account and increase your monthly mortgage co. to provide for this advance payment for insurance coverage.
Lender force-placed insurance will only provide coverage on balance of the loan therefore any equity in the property will not be covered or paid if a loss claim was filed. It is best to renew your homestead insurance and not allow the lender force-placed insurance to be your form of adequate protection. The creditor is only interested in protecting the balance of their loan, not your equity.
Learn more about bankruptcy by clicking on the informational links provided below:
Adequate protection for Auto
Selling Home while in Bankruptcy
Auto purchase during bankruptcy
