Managing Credit and Debt After Hurricane Sandy… Your Questions Answered

Allowances Being Made By Financial Institutions
The information in this section comes from the Federal Reserve.

Are financial institutions making any allowances for affected individuals?
This depends on your institution. Three federal agencies – the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation, have encouraged (but do not require) financial institutions to work constructively with borrowers in affected communities.

Contact your financial institution and explain your situation to determine the particular allowances that your institution may be making.

Debt Obligations

hurricane-sandy-mortgage-financesMy house is damaged and uninhabitable. Am I still obligated to pay my mortgage?

You are still required to pay your mortgage, even if your house is damaged or you are unable to live in it. However, lenders may be willing to offer a grace period to disaster victims. Contact your lender for more information.

If your lender does business with Fannie Mae: Fannie May has mortgage relief provisions for borrowers, and mortgage servicers may grant forbearance to any borrower affected by a natural disaster. Within 90 days, servicers are expected to establish contact with homeowners who have been affected and determine if additional assistance is necessary.

  • Under Fannie Mae’s disaster relief guidelines, a servicer may temporarily suspend or reduce mortgage payments for up to 90 days if the servicer believes a natural disaster has adversely affected the value or habitability of the property, or if the natural disaster has temporarily impacted the homeowner’s ability to make payments. Since a storm may make it difficult to reach homeowners, Fannie Mae allows servicers to grant this temporary relief even if they cannot contact the impacted homeowner immediately.
  • o Homeowners should contact the lender to whom they send their monthly mortgage payment. Homeowners can also contact Fannie Mae through one of  twelve Mortgage Help Centers. Contact information is available at www.knowyouroptions.com or by calling 1-800-7FANNIE (6643).

What if I have a loan from Freddie Mac?

Freddie Mac disaster relief policies provide a number of ways for mortgage servicers to help affected borrowers in disaster areas. Freddie Mac strongly encourages servicers to help affected borrowers with Freddie Mac-owned loans by:

  • Suspending foreclosure and eviction proceedings for up to 12 months;
  • Waiving assessments of penalties or late fees against borrowers with disaster-damaged homes; and
  • Not reporting forbearance or delinquencies caused by the disaster to the nation’s credit bureau.
  • Homeowners who have experienced hardships should contact the lender to whom they send their monthly mortgage payment, call Freddie Mac at 1-800-FREDDIE, or learn more about Freddie Mac Mortgage Relief Information online.

Am I still required to make insurance premium payments?
Yes, you generally must continue to pay your insurance premiums. However, some insurers may grant extensions. Contact your insurer for more information.

Debt Collection
The information in this section is taken from the Federal Trade Commission website.

Rights of Debtors: Fair Debt Collection Practices Act (FDCPA)

  • If you use credit cards, owe money on a personal loan, or are paying on a home mortgage, you are a “debtor.” If you fall behind in repaying your creditors, or an error is made on your accounts, you may be contacted by a “debt collector.” A debt collector is any person who regularly collects debts owed to others. This includes attorneys who collect debts on a regular basis.
  • The FDCPA requires that debt collectors treat you fairly and prohibits certain methods of debt collection. The law does not erase any legitimate debt you owe.

debt-collection-tipsWhat debts are covered?
Personal, family, and household debts are covered under the Act, including money owed for the purchase of an automobile, medical care, or charge accounts.

How may a debt collector contact me?
A collector may contact you in person, by mail, telephone, or fax. However, a debt collector may not contact you at inconvenient times or places, such as before 8 a.m. or after 9 p.m., unless you agree, or at work if the collector knows that your employer disapproves of such contacts.

Can I stop a debt collector from contacting me?
You can stop a debt collector from contacting you by writing a letter telling them to stop. Thereafter, the collector may not contact you again except to say there will be no further contact or to notify you that the debt collector or creditor intends to take specific action. Sending such a letter does not make the debt go away if you actually owe it. You could still be sued by the debt collector or your original creditor.

May a debt collector contact anyone else about my debt?
If you have an attorney, the debt collector must contact the attorney, not you. If you do not, a collector may contact other people, but only to find out where you live, your phone number, and where you work. Collectors usually are prohibited from contacting third parties more than once. In most cases, the collector may not tell anyone other than you, your spouse, and your attorney that you owe money.

What must the debt collector tell me about the debt?
Within five days after you are contacted, the collector must send you a written notice telling you the amount you owe; the name of the creditor to whom you owe the money; and what action to take if you believe you do not owe the money.

May a debt collector continue to contact me if I believe I do not owe money?
A collector may not contact you if, within 30 days after you receive the written notice, you send the collection agency a letter stating you do not owe money.  However, a collector can renew collection activities if you are sent proof of the debt, such as a copy of a bill for the amount owed.

What types of debt collection practices are prohibited?
Debt collectors may not harass, oppress, or abuse you or any third parties. For e ample, debt collectors may not use threats of violence or harm; publish a list of consumers who refuse to pay their debts (except to a credit bureau); use obscene or profane language; or repeatedly use the telephone to annoy someone.

Debt collectors may not use any false or misleading statements. For example, debt collectors may not falsely imply that they are attorneys or government representatives; falsely imply that you have committed a crime; falsely represent that they operate or work for a credit bureau; misrepresent the amount of your debt; indicate that papers being sent to you are legal forms when they are not; or indicate that papers being sent to you are not legal forms when they are.

Debt collectors may not state that you will be arrested if you do not pay your debt; they will seize, garnish, attach, or sell your property or wages, unless the collection agency or creditor intends to do so, and it is legal to do so; or actions (i.e., a lawsuit) will be taken against you, when such action legally may not be taken, or when they do not intend to take such action.

Debt collectors may not give false credit information about you, including to a credit bureau; send you anything that looks like an official document from a court or government agency when it is not; or use a false name.

Debt collectors may not engage in unfair practices. For example, collectors may not collect more than your debt, unless state law permits such a charge; deposit a post-dated check prematurely; use deception to make you accept collect calls; take or threaten to take your property unless this can be done legally; or contact you by postcard.

Contacting My Creditors and Collectors
If you can afford to make small monthly payments, you should contact the collector to try to reach an agreement on the following:

  • Total amount owed, including the annual interest; amount of monthly payments; due dates; address where payments must be mailed; and whether negative information will be removed from the credit report.
  • Keep a record of calls from the collector, including the names of the individuals you speak with and the date, time and details about the calls.
  • If you arrange a payment agreement, send a letter confirming the terms of the payment plan. Keep copies of any letters and payments sent to the collector. Letters to the collector should be sent via certified mail, return receipt requested.
  • Consumer Credit Counseling Services may negotiate with collectors on your behalf for little or no fee.
  •  You may be considered “judgment proof” if you have no employment income, no real estate, no personal property of significant value, or car worth more than $1,200 (and likely no bank accounts or investments). If you are thus unable to arrange a workable payment plan, consider sending the collector a letter advising of your inability to pay, and requesting that the collector cease contact. Explain any special circumstances to explain the inability to pay. A collector then may only contact you to notify you of its intention to pursue a lawsuit or that collection efforts will cease.

What can I do if I believe a debt collector violated the law?
You have the right to sue a collector within one year from the date the law was violated. You may recover money for the damages you suffered plus an additional amount up to $1,000, as well as court costs and attorneys’ fees.  File a complaint with the Federal Trade Commission.

How do I decide which bills to pay first?
Before deciding which bills to pay and which to ignore, you need to know the consequences. These three types of debt could have immediate, harmful consequences if unpaid.

  • Court-ordered payments (i.e., alimony or child support) must be paid on time or jail time could be sought for contempt of court. If you are unable to pay, ask the court to modify the payment order.
  • Ongoing services, such as utilities, telephone service, or health insurance coverage, must be paid or service/coverage will be discontinued.
  • Items purchased on credit or pledged as security on a loan can usually be taken if payments are not made.

What property is considered protected?
Under federal law there are certain things that cannot be taken, including:

  • Social Security payments, annuity income, pension income, worker’s compensation and unemployment compensation (thought there are some exceptions for child support, alimony, and taxes);
  • Up to $15,000 equity in a home;
  • Proceeds and avails from a life insurance policy;
  • Necessary household appliances and furnishings;
  • Necessary personal items and clothing;
  • Necessary medical equipment; and
  • If working, any tools needed for the job, and an automobile if it is necessary for the job (merely going back and forth to work does not qualify).
  • You should notify creditors if all your property and income is exempt. They will usually stop collection activity, and possibly even write off the debt.

Filing Bankruptcy
Bankruptcy may become a last resort option for disaster victims (individuals and businesses) who cannot satisfy creditors. Generally bankruptcy results in forgiveness or restructuring of certain debts, but will not necessarily cancel all debts.  Due to the complexity of the Federal Bankruptcy Laws and State Insolvency Proceedings, individuals and businesses wishing to pursue bankruptcy should contact a bankruptcy/insolvency attorney in order to determine the best course of action.