Lenders typically hire an attorney to send debtors a letter demanding proof of insurance coverage on houses and vehicles that secure debt. Just about every written loan contains boilerplate language requiring the borrower to provide and maintain insurance protection over the collateral. These letters threaten the debtor with a motion to lift the automatic stay protection if the information is not timely produced. This forces additional work on the attorney, who has to contact the debtor, obtain the information and send it on the lender’s attorney.
Now, think about this for a moment. Before the borrower filed bankruptcy the lender either already had the insurance information or did not care to ask for proof of insurance. In bankruptcy , lenders use the insurance requirement as a sword hoping to derail the bankruptcy or to add expensive coverage procured by the lender at debtor’s expense.
What to do, oh what to do? A simple solution is to ask your client for the insurance information at the time of your initial interview. List the name of the insurance company along with the name, address and phone number of the local insurance agent right smack dab on the property schedules. There is room to insert this information in the Description of Property field on Schedules A and B.
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