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Debt Relief – Insolvency – Bankruptcy Information » Foreclosure Help » Does damage already paid through an insurance claim need to be completed if home is going to foreclosure?

Does damage already paid through an insurance claim need to be completed if home is going to foreclosure?

My best friend is letting her home go to foreclosure due to extenuating circumstances. She had water damage in April and the insurance company is going to pay her out this week on the damage ($6000). The repairs have not been completed and since she is letting the house go to foreclosure, she is contemplating getting the repairs done at all and pocketing the money. Are there repercussions for this? She is afraid of getting accused of insurance fraud. Should she do the minimal drywall work just to make it presentable? Will her claims impact her ability to get renter’s insurance for her new residence? Thank you for your help!


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4 Responses to "Does damage already paid through an insurance claim need to be completed if home is going to foreclosure?"

  1. shelcom says:
    It is technically insurance fraud,but not sure how the insurance company is going to know… however why doesn’t she use the money to get current on the mortgage?
  2. Gambit says:
    Was the bank listed as a loss payee on the policy? If so then the bank’s name should be listed as a co-payee on the cheque from the insurer. If they were not listed on the policy, then your friend is going to have more issues with the bank than with the insurer. What did your friend agree to with the insurer? If the agreement was that repairs will be completed, and she doesn’t perform the repairs, then she is guilty of fraud. However the more pressing concern is that if the bank forecloses on a house that is damaged, the bank will come after your friend with a vengeance, especially when they find out that there was an insurance payout for the damages on a policy where their interests were not protected. Getting a Tenant’s policy will be the least of your friend’s concerns (yes the claim will affect her ability to get a policy, although not to a huge extent if this is the only claim).
  3. mbrcatz17 says:
    Well, she’s in for a bit of a surprise, because likely the check will be made payable to both her and the bank – and she’s NOT going to be able to cash it.

    I seriously doubt the bank is going to sign off on it until they’ve had THEIR guy confirm that the work is done – because they know she’s financially shakey.

    Yes, this claim could impact her ability to get renters insurance – but her credit score is much, much more likely to prevent her from being able to get renters insurance, and will likely be a problem if she’s trying to rent from someone that does credit checks as part of the screening program.

  4. Phil says:
    She can try, but the insurance check will most certainly be made payable to her and the mortgage company. Insurance companies have been through this before, and know that the actual owner of the house isn’t your friend.

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