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#952 Earthquake: Debt Payment

Here’s the smart way to find out about getting financial relief from your debts if your home or apartment was damaged by an earthquake. This message discusses your obligation to pay mortgage payments, taxes, utility bills, and consumer debts. Please have a pen and paper ready to write information you may need later, such as phone numbers.

First, this message discusses your obligation to make Mortgage Payments.

Even if your house or condominium has bee destroyed or damaged, you are still required to make your mortgage payments. If your earthquake insurance does not over the mortgage payment, or even if you do not have earthquake insurance, many lenders will allow customers to defer or postpone payments for several months. Call your lender as soon as possible to discuss whether the lender will agree to either a moratorium on payments or a reduction in payments. The moratorium or the reduction in monthly payments could be for a specific amount of time or an indefinite period.

Remember, if your lender agrees to modify your payment schedule, be sure to find out whether interest will continue during the moratorium or during the period involved. If possible, negotiate for “no interest accrual” during the time period involved. Be careful; if interest does continue to accrue, the loan balance could be drastically increased during the period of reduced payment or no payments. As always, be sure to document every conversation in writing. Get full names, titles, and telephone numbers of everyone you speak with at the lending institution. Confirm your discussions in writing to the lender and always keep a copy of all correspondence you send, even if you have to go out of your way to get a copy made.

If damage to the property is severe enough, and you have no equity in the property, you and your lender can discuss the possibility of abandoning the property to the lender. If you decide that your property is damaged to the extent that you cannot afford to repair it, it is wise to talk to an attorney before abandoning your property to the lender. Often times, you can negotiate a “deed in lieu of foreclosure” in which the lender agrees to take the property back in full satisfaction of the debt. If such agreement is made, make sure that the lender has agreed to waive any deficiency claim it may have against you. If such assurances are not made, the lender may be able to sue you for the difference between what the property can be sold for and what is owed, that is, the deficiency. If a deed in lieu of foreclosure has been negotiated, you should insist that the lender report to the credit reporting agencies that the loan was “satisfactorily retired” or the other similar language.

If your lender refuses to take the property back, you may want to hire an attorney to help persuade the lender that the deed in lieu of foreclosure is the best alternative. It is important to note that if you and your lender do not reach an agreement, you must make your mortgage payments or else the lender can foreclose on your home.

If you want to hire an attorney, press 199 at any time during this message to be transferred to a SmartLaw referral representative. You can also call SmartLaw referral line directly at (213)243-1525 or get a referral by visiting www.smartlaw.org.

This message will now discuss our obligation to pay taxes:

If your house or condo was destroyed or damaged by an earthquake, California law provides for a reassessment for the property taxes. You must request a reassessment within sixty (60) days of the disaster. Contact the county assessors’ office at (213) 974-7394. Again, that number is (213) 974-7394.
Ask for two forms, one seeking a reassessment of property damage by “misfortune or calamity,” and the other seeking a temporary deferral of payment. File both forms within 60 days of the date the damage occurred and include photographs. The assessor’s office will send out an appraiser to determine the extent of the damage and reassess your home.

If you do not have earthquake insurance and have sustained substantial losses, you may be eligible for a tax deduction known as casualty loss. However, to claim a casualty loss, you must meet certain requirements. Because of the potential for serious economic consequences, it is wise to consult with a tax advisor or tax attorney before claiming a casualty loss. Casualty loss claims can trigger a tax audit, so keep receipts, photographs, and other appropriate documentation to substantiate the claim. Remember to ask your tax advisor or attorney about the option of claiming your casualty loss on your next tax return so can possibly obtain a refund as soon as possible.

If you need to consult with an attorney, call the SmartLaw Referral line at
(213) 243-1525 or visit www.smartlaw.org  you can also press 199 at any time during this message to be transferred to the referral line.

The next part of this message addresses utility bills:

If you can no longer live in your home, it is a good idea to call your utility companies right away and tell them about the situation. If a move is necessary, deposits for electricity, water and gas can be transferred.
To reach Southern California Edison you can call (800) 611-1911 if you have service or outage questions you can also visit www.sce.com . To reach Southern California Gas Company call 1-800-427-2200 or visit www.socalgas.com.

 

Finally this message will discuss your obligation to pay Consumer Debt.

Even if your home has been destroyed or damaged by the earthquake, you are still obligated to make credit card payments and home equity payments. Your credit rating can be damaged by missing payments or a collection action, so it is important to notify all creditors in writing as soon as possible of your need to postpone or reduce payments for a period of time. Some lenders may increase your credit line for emergency expense. However, be careful in negotiating such an arrangement because the interest rate can be very high. You should also check with your bank to see if they offer a personal line of credit, which may have a lower interest rate, than the interest rate charged for increasing your credit card line.

Once you have reached an agreement with a creditor, make sure that your arrangement will not negatively affect your credit report. Also, get the full name of each of the creditor’s representatives you spoke with the follow-up with a letter that repeats the details of the agreement. Keep a copy of this agreement, so that if there is ever a problem, you have written proof. In fact, it is crucial that you document all communications you have with any creditor and keep a copy of every letter you send, even if you have to write a letter by hand and use a piece of carbon paper to make a copy.

If you need to hire an attorney, press 199 now to be connected with a SmartLaw Referral representative. You can also call (213) 243-1525 or visit www.smartlaw.org.

For more information about what the Smartlaw Referral & Information Service can do for you, listen to message 103. If you need low-cost of free legal assistance, listen to message 104 through 112.

To hear a list of other earthquake-related information messages, press 950.

Would you like to listen to another message? If so, press the three-digit message number now.

This message was brought to you by SmartLaw, the nation’s oldest and largest Lawyer Referral & Information Service, sponsored by the Los Angeles County Bar Association. This message has provided legal information and is not intended to take the place of the advice of a lawyer. If this has been helpful, please tell your friends and family about the service.

Thank you for calling the Smartlaw Information Line, the smart way to get legal information.



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