Force Placed Insurance Questions

[Cindy McHugh]

I sold/financed a house in NC in 2011. The buyers never made a payment on time and when they got several payments behind, my attorney sent them a foreclosure notice. They filed for ch 13 bankruptcy.

The DOT states they must maintain insurance on the property or I may obtain it on their behalf. They had a homeowner's policy at closing (required), but it was paid month-by-month and I soon started getting cancellation notices. The easiest way to keep coverage was to just call their agent with my credit card, which I did as needed. I'd then have to fight them for reimbursement (they still owe me for two months premiums).

I'm not comfortable with them having "control" of the policy and the ability to cancel it at anytime, effective immediately. I explained my need for continuous coverage and asked the agent if I could take out a policy on the house myself. Since it's in their name, I cannot (damn my attorney for telling me not to do a contract for deed!). It seems crazy that I have the overwhelming financial interest in the property and I can't protect it.

I just learned of "Force Placed" insurance, whereby a lender can obtain insurance on a property they financed. The woman I spoke with at J.T. Miller said this even includes vandalism for residential units, in the event the people strip or trash the property before they leave (if foreclosed upon). This seemed too good to be true. I said, "sign me up!" She couldn't because I have only two properties financed and their value is less than $500k (minimum for investors). She said she'd try to find a policy to meet my needs, but made no promises.

I had asked if it would be permissible to have a group of investors pool their properties somehow to apply for the insurance together and she said that would enable everyone to qualify, as long as the combined value is at least $500k. She said it would have to be handled through a LLC company. But I don't know the specifics of how it would need to be set up.

I'm wondering if anyone is aware of such an entity that procures this type of insurance for an individual investor. Or, if anyone has any other ideas, I'd welcome hearing them!

As an aside, the folks who filed for bankruptcy advertised the $2000+ water softener system on Craigslist for $400. When I informed my attorney of this, he contacted their attorney and he advised them to remove the ad. I also informed the bankruptcy trustee. I can't believe I have to sit idly by while they destroy the value of the home. I know someone who is willing to buy the home for more than what they owe ($71k) and far more the value they stated it's worth to the bankruptcy court ($65k), but they said they want AT LEAST what they agreed to pay ($88k). It's been 6 months since they've made a payment, yet they seem to have all the rights. It's disgusting.

[Joel Owens]

Another issue is if the case is dismissed they can refile again and start the automatic stay.

They cannot always refile right away it depends on why the case was dismissed and who dismissed it them or the trustee.

If they filed again in a certain time frame then they are classified as a multiple filer status and generally the stay provision only is good for 30 days. There a thousand different scenarious that affect how a BK plays out.