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House

• Q. My house was damaged by the storm, and I can't live in it.  Do I still have to pay my  mortgage?
• A. Yes.  Most home loan/mortgage contracts require a homeowner to make mortgage payments even after a disaster.  This is usually true even if your house is damaged and you cannot live in it. 
• Q. What if I can't pay the mortgage because I don't have a paycheck after the disaster?
• A. Call the bank, mortgage company, or lender.  Many lenders will allow you to delay your mortgage payments for several months after a disaster.  (Interest on the amount you do not pay may continue to be added, though.)
  Many lenders in Louisiana have issued public notices that they will allow forbearances  (grace periods) on mortgage payments for a limited time.  Contact your lender to see  what arrangements they may be able to work out for you.
• Q. Should I worry about foreclosure?
• A. In Louisiana, all foreclosures require a court order.  It will be an extended period of time before courts in the parishes hurt by Katrina will be able to allow new cases to be filed.    You may some time, but you should contact your lender now and see what they are willing to do for you.
  You may also be eligible for FEMA assistance to help you with your mortgage payments,  if you have received a written foreclosure notice because of disaster- related financial  hardship.  Apply for FEMA benefits at a Disaster Assistance Center site.
  Finally, if your mortgage is FHA or FmHA, you may be entitled to reduced or suspended  payments.  Your lender is required to notify you of these rights before it begins  foreclosure proceedings.  To receive this assistance, you must meet the deadlines the  lender gives to you.

Inability to Pay

• Q. I am not working because of the storm.  I can't make my loan payments.  What do I do?
• A. Contact your creditors and explain what has happened.  Many creditors want to help.
• Q. I can't make my full payment, but I can pay a little.  Should I try to negotiate with my  creditors?
• A. Yes.  Contact your creditor to ask if your payments will be acceptable, but be sure  you reach an agreement on all of the following points:
  • the total amount you owe on your bill, and the amount of interest that will be added each year;
  • the amount of the monthly payments;
  • the due dates when the payments must reach the creditor;
  • the address where the payments need to be mailed; and
  • whether or not any negative information about the bill will be removed from your credit report.

Inability to Pay, Credit Scores

• Q. If I miss some loan payments, how will it affect my credit?
• A. Contact your bank before skipping a payment.  Regulators have asked creditors to work with customers who were affected by the storm.   Call your creditors.  Some creditors may allow you to skip a few payments without it  affecting your credit history.  Some creditors may change the terms of your loan, taking into account your new circumstances.

Inability to Pay, Car

• Q. Can a creditor take my car?
• A. Maybe.  Auto loans usually allow the collector to repossess a car without advance notice  after you fail to make payments.
• Q. Can I get my car back?
• A. Yes.  Be prepared to pay the full balance of the loan, plus all costs of repossession to get  your car back.  If you can't pay, the collector can sell the car and sue you for the amount  you owe over the sale price of the car.

Inability to Pay, Jail?

• Q. Will I go to jail for not paying my bills?  What can happen to me?
• A. Unless your payment was part of a court order, there is no threat of your being sent to  jail.  However, the collector can sue you to collect the debt.  A court judgment would  give the collector a right to collect any nonexempt assets from you.  The collector has a  right to report the unpaid debt to a credit reporting agency.

Inability to Pay, Priority?

• Q. I can't pay all of my bills.  How do I decide which bills to pay first?
• A. There are consequences to not paying any of your bills, but the following types of debts  may have immediate, harmful consequences for you, if they are not paid.*
  • Court-ordered payments, like child support and alimony, have the threat of contempt - actual jail time- associated with them.  If you cannot make your court-ordered payments, DO NOT IGNORE them.  Ask the court to change the payment order, taking into consideration your new circumstances.
  • Ongoing services like health insurance, utilities, or telephone service must be paid, or you will lose future coverage or service.  For past due utilities, a creditor/collector can disconnect the service and withhold reconnection, even if you move to another residence.  They may also sue to collect the unpaid balance.
  • Items bought on credit can be taken from you if your credit payments are not made.  The creditor must have a court order to take the property under Louisiana law.
  • Items that have been pledged to secure a loan may also be taken from you if your loan payments are not made.  The creditor must have a court order to take the property under Louisiana law.
  *Remember, even if the creditor has taken your property, they may still have a right to  recover money.  If a car is repossessed, and the resale value is less than what you owe,  you may be liable to pay the difference.

Collections

• Q. I have been unable to pay my bills, and the bill collectors have started to call.  What do I  need to do to protect myself?
• A. Keep a record of all phone calls from the collector.  Write down: the full name of the person you talk to, the date and time of the call, and a description of the conversation.
• Q. I made a payment agreement with the collector.  What do I need to do now?
• A. Send a letter to the collector, by certified mail, confirming the details of your agreement  about the payment plan.  Keep copies of any letters or payments you send the collector.
• Q. I am not comfortable talking to the collectors.  Can anyone help me negotiate with them?
• A. Yes.  Consumer Credit Counseling Services may negotiate with the collectors for you for  little or no fee.  They are listed in the white pages of the phone book.
• Q. I just can't pay anything.  Can I get these collectors to leave me alone?
• A. If you have no employment income, and no prospects for income, you don't own any real estate or valuable property, you have nothing in a bank account or other investments, and you cannot work out  a payment plan, then you should consider sending the collector a letter informing them of your inability to pay.  In your letter, ask the collector to stop contacting you about the debt.  You should include your special circumstances that explain why you are unable to pay.  This type of letter limits a collector's right to contact you.

Exempt Property

• Q. Is any of my property protected from creditors?
• A. Yes.  Under federal law and Louisiana law, there are certain things that cannot be taken  from you, no matter how much you owe, regardless of whether or not you file  bankruptcy. (*But there are exceptions for child support, alimony, and taxes.*)
  Exempt property includes:
  • Social Security payments, annuity income (private disability insurance payments), pension income, worker's compensation and unemployment compensation.
  • Up to $25,000 equity in a home.
  • Proceeds from a life insurance policy.
  • Necessary personal items and clothing.
  • Necessary medical equipment.
  • Tools needed for a job you currently have.
  • A car if you need it to actually do your job, not just to get to your job. (If your car is not paid for, and you have not made the payments on the car loan, the lender can repossess the car, even if you need the car to do your job.)

If your property is exempt, tell your creditors in a written letter.  Once they know there is  nothing to take, they may write off the debt or at least stop collection activity.

Bankruptcy

• Q. Should I file bankruptcy?
• A. Bankruptcy may be a last resort for a disaster victim who can't pay their creditors.  It won't necessarily cancel all of your debts.  If you are considering filing for bankruptcy, you should contact a Bankruptcy attorney SOON.  The Bankruptcy laws have been changed.  New laws go into effect on October 17, 2005.  The new law is expected to make it harder for people to file for bankruptcy protection and more difficult for businesses to reorganize.  You can contact the State Bar of Texas Lawyer Referral Service at 1-800-252-9690 or the Louisiana State Bar Association at 1-800-310-7029 for help in  finding a bankruptcy attorney. Or call the local legal aid program if you are low income.