Des Moines, LawFuel.com – Many Americans do not realize that declaring bankruptcy may affect their home insurance rates.
Once personal bankruptcy has been filed, all of a debtor’s property and assets come under the purview of a court assigned trustee. This individual closely watches spending and keeps track of assets, to protect the creditor’s interests, and the debtor’s interests. While going through the process of bankruptcy, everything is paid by the trustee. However, a debtor needs to keep up their home insurance.
If an individual has declared a Chapter 7 bankruptcy, this is a liquidation of assets process. Once all property is sold, the funds go to pay off creditors. In most instances, a debtor’s main asset is their home. If that home is sold during a Chapter 7 bankruptcy, home insurance may be cancelled. However, should they be filing for Chapter 13 bankruptcy, the debtor makes installment payments to a trustee over a three to five year period, and over time, all creditors get paid back.
While under the scrutiny of the bankruptcy trustee, expenses are closely monitored to ensure they are not too excessive. For instance, if home insurance appears to be too expensive or the debtor is carrying too much insurance, the coverage may need to change. Will this affect one’s credit rating? Although bankruptcies remain on a credit report for up to ten years, most home insurance companies do not access a credit report to figure out a debtor’s premium rate. However, auto insurance companies do check credit ratings, and a credit rating affects premiums. This is something a debtor should ask an Iowa bankruptcy lawyer during a discussions on how to move forward through a bankruptcy.
When it comes to the home, the insurance rate is mainly determined by its location, what risk there may be insuring it, e.g. a fireplace without proper ventilation, its age, size and so forth. If the home is in a risky location, rates will be higher. If the house is 100 years old, they may also be higher.
The point to take away from this is that the bankruptcy trustee does not make insurance payments on a home for the debtor. Once a bankruptcy is confirmed, the debtor is required to make those payments. If there have any questions, it is best to speak to a qualified Iowa bankruptcy lawyer and find out the correct information needed to begin the bankruptcy process.
Kevin Ahrenholz is an Iowa bankruptcy lawyer and Iowa bankruptcy attorney.