Life sometimes doles out bad luck in double doses. Given how many millions of people were directly and indirectly affected by Hurricane Sandy, it’s clear that thousands of people in the New York, New Jersey and Connecticut areas likely were also dealing with financial problems even before the storm hit.
For example, consider people whose homes were financially underwater because of the mortgage crisis in the four years preceding the superstorm. Another group includes those who were unemployed or underemployed when the winds knocked down their homes. There were also so many people facing life-threatening illnesses, such as cancer or HIV/AIDS, that the New York Says Thank You Foundation has created a special fund for helping families in these circumstances.
The conditions brought about by Sandy have created serious financial hardship:
- The maximum payouts from FEMA to any homeowner would be $30,000, even if insurance shortfalls (the difference between damage costs and payouts) could easily be $100,000.
- People whose homes are in coastal areas are being told to raise their homes 2 feet or more higher — at a cost of tens of thousands of dollars in most cases — or face property insurance rates of more than $30,000 per year.
- Many individuals lost their jobs after the storm because their place of employment suffered so much damage that the employer closed or moved away.
Some people facing these circumstances have resorted to premature withdrawals from their 401(k) plans. In addition to the 10 percent tax that must be paid on those withdrawals, it also results in diminished savings decades out when the individual reaches retirement age. Instead, a bankruptcy filing might be advisable. Speak with a New York bankruptcy attorney to discuss options under liquidation (Chapter 7) or reorganization (Chapter 13).