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Hurricane Harvey, Debt, and You

Harvey has had a devastating impact in this area. The recovery has begun but his effects are far-reaching. Beyond the property damage, distress, and displacement, there is Income Disruption, Increased/Extra Expenses, and financial stress. Income disruption from missed days at work or shut down businesses. There are extra expenses from repairs and even paying for additional living quarters.Here are some hints and information to hopefully help you navigate the coming months.

Credit Card Bills.

Credit cards are what are called “unsecured” debts. That means there is no collateral that can be repossessed if the debt is not paid. The only means of collecting are incessant calls, letters, and eventually lawsuits. If you fall behind on credit card payments because of the extra expenses or income disruptions, the first thing to do is contact your credit card company. Many companies will offer forbearance or reduced payments if you are affected by Harvey. The only problem is that such programs will likely be limited to a month or two. The effects of extra expenses or reduced income may not.

Mortgage problems.

Several problems can arise with mortgages. Without the steady stream of income or with the increased expenses of living away while he home is being repaired, or the repairs themselves, you may fall behind on the monthly payments. If that occurs, the first step is to contact your mortgage servicer. Some servicers are allowing those affected by Harvey to put off a payment or two. Other mortgagors will not allow deferment, but are waiving late charges and not reporting late payments the credit bureaus. Both of these programs usually run through November. Unfortunately, the financial issues from Harvey will last much longer. If you do get behind, it will take months to proceed to foreclosure. Under Texas law, residential foreclosures only occur on the first Tuesday of the month after two notices in the previous two months. Business foreclosures only require one 21 day notice. In addition, if there is a significant loss to the value of the home and no flood insurance, you could end up in a scenario where you are paying for an uninhabitable house without real value to the family. Again, the debt is still owed but the house has to be replaced or repaired without the insurance funds to do so.

Vehicle issues.

You may be dealing with a damaged or totaled vehicle without enough insurance recovery to repair or replace. Some times there is no recovery at all because the insurance coverage either does not exist or is too little. In that case, you have no vehicle but still owe the unpaid balance to the lender. That debt does not just go away. The lender will eventually seek payment. This simply compounds the already devastating loss.

FEMA/SBA Loans.

If there is no flood insurance, FEMA will likely offer loans for repairs. If the loan is less than $10,000. it may be unsecured.See above. Anything above that amount is likely to be added as another lien to your house. This loan meets the immediate need of repairs but reduces any equity or drives the debt farther above the homes’ value. In addition, the monthly amount to pay for the home is increased, putting further strain on an already stretched budget.

In all of these issues, there may be solutions that can relieve the financial stress. I have 34 years of experience in this area. If you find yourself facing these problems, don’t tackle them alone. Give me a call at (281) 954-3161.