Written by attorney Irina Lust

Bankruptcy Providing a Path to Recovery after Hurricane Sandy

For the many victims of hurricane Sandy in our Russian Brighton Beach, Sheepshead Bay and Seagate community, the hardships caused by this natural disaster have lasted long after the winds have calmed, the waters receded and the physical devastation repaired. While our tight knit Russian community has pulled together and assisted friends and family, the financial aftermath of a natural disaster can be as daunting as the actual storm. Many in our community have seen their basements flooded, cars destroyed and houses become uninhabitable. The financial impact of hurricanes often drives victims to seek bankruptcy relief.

While hurricane Sandy disrupted the lives of many in our Brighton Beach Seagate community, it did not slow the demand for satisfaction of financial obligations like mortgage payments, utilities, credit cards and other liabilities. Bankruptcy relief can provide options for protecting your home, assets and income following hurricane Sandy and other natural disasters. The obligation to continue making mortgage payments on your home does not automatically cease because you are temporarily displaced. While you should contact your mortgage company about temporary relief, they can continue to demand that mortgage payments be made on time.

If you do not have homeowner’s insurance or your homeowner’s settlement is for less than you anticipated, you may seek Federal Emergency Management Agency (FEMA) benefits. Many people may find that they cannot afford to pay existing liabilities even with FEMA assistance. Some hurricane victims in Brighton Beach may hesitate to seek bankruptcy relief because of uncertainty about whether their FEMA benefits are available to satisfy creditors in a bankruptcy proceeding. However, FEMA benefits are exempt from garnishment under 44 C.F.R. § 206.110(g).

Hurricane Sandy and other storms can result in substantial damage to your valuable assets, and many assets may not be adequately covered by insurance. Bankruptcy relief may provide a means to prevent you from continuing to have your valuable assets put at risk following a natural disaster. Some of the ways that bankruptcy may protect you following a hurricane or other major storm include:

Chapter 7 Bankruptcy Discharge: If you qualify for a Chapter 7 Bankruptcy, this bankruptcy chapter can provide a range of benefits. If you need to reduce your expenses so that you can both pay your mortgage payment and pay for temporary housing, a Chapter 7 discharge can eliminate most unsecured debts, such as credit cards balances, unsecured loans, unpaid utilities and other obligations that are not subject to a security interest. Because a Chapter 7 discharge eliminates most if not all of your unsecured debts, it frees up the financial resources you have available to you so that they can focus on protecting your home or replacing damaged property rather than pay down existing unsecured obligations.

Chapter 13 Bankruptcy: While you may have insurance coverage or qualify for FEMA benefits, you may find that you fall behind on your mortgage payments while waiting for either insurance or FEMA payments. This form of bankruptcy relief permits you to make current mortgage payments and a monthly plan payment that includes a payment toward arrearages on your mortgage, other secured debts and maybe a portion of unsecured debts. Chapter 13 provides a way to catch up on your mortgage if you have fallen behind because of additional expenses incurred while attempting to recover from a natural disaster.

Automatic Stay: An experienced bankruptcy attorney can evaluate your situation and advise you if bankruptcy is a viable option if you are facing financial obstacles caused by hurricane Sandy or other natural disasters. A bankruptcy attorney also can help you determine which bankruptcy chapter offers the best option for your individual circumstances. Regardless of the bankruptcy chapter that you select, another advantage of filing under Chapter 7 or Chapter 13 is that it provides the benefit of the automatic stay. The automatic stay tolls most collection actions which can be extremely valuable when you are dealing with the expense of repairing or replacing property like your home or vehicle after a natural disaster. The automatic stay essentially provides a temporary “time out" from debt enforcement actions while you cope with the immediate financial challenges of an unanticipated event like a hurricane.

If you experienced significant damage to your assets in hurricane Sandy, experienced Russian Brighton Beach, Sheepshead Bay & Seagate bankruptcy attorney Irina Lust offers a free consultation so that she can evaluate whether bankruptcy is an appropriate option for you. Call the Law Offices of Irina Lust, PLLC so that we can explain your options at (212) 960-3775 or contact us via our online intake form.

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