How Does Bankruptcy Affect Car Insurance

Discharging Judgments In Bankruptcy

When drivers who have no auto insurance are in an accident, they are personally liable for the damage they cause. Without insurance, however, it is unlikely that they will be able to pay for the property damage, injuries or deaths resulting from the accident. If you cannot afford to pay the judgment entered against you after a car accident in which you had no insurance coverage, your driver’s license may be suspended.

At Redman Ludwig, P.C., our lawyers have helped many people get their driver’s licenses reinstated. Filing Chapter 7 or Chapter 13 bankruptcy may work to reduce or discharge the judgment against you. We advise people to discuss this option with an experienced bankruptcy attorney before making a decision. We will review your finances and debts, including unpaid judgments, to determine whether filing bankruptcy will work for you.

Filing bankruptcy halts judgments and pending lawsuits against you by providing the protection of the automatic stay, which prevents creditors from taking collection actions while the bankruptcy is in progress. In addition, by including the judgment in your filing, it may be discharged or reduced.

Only judgments from car accidents caused by negligence may be reduced or discharged under bankruptcy. Accidents caused by driving under the influence of drugs or alcohol are not eligible.

How Does Going Bankrupt Affect My Credit Rating

Once a person files bankruptcy in Ontario, the Office of the Superintendent of Bankruptcy will notify the credit bureaus and the bankruptcy will be noted on your credit report. This will impact your report for 6 years after discharge. For a second-time bankrupt, it will remain for a period of 14 years.

Having a bankruptcy noted on your credit report flags you to lenders as being high risk. This high risk status will make your ability to obtain future credit much more difficult and increase the interest rates charged on any credit that you are able to obtain.;However, there are ways to successfully rebuild your credit after bankruptcy.

Do I Have To Volunteer The Information

For many years the insurance industry relied on an antiquated law dating back to the Marine Insurance Act 1906 which put the onus of disclosure on the policyholder to disclose any material fact that they thought would affect the judgement of the insurer to offer cover. With effect from 6th April 2013 The Consumer Insurance Act 2012 came into force. This Act removes the duty on consumers to volunteer information if not asked the question. So, you dont have to volunteer the information but it does mean that you have to be very careful indeed when taking out a new policy or renewing an existing one.

Also Check: What Is Epiq Bankruptcy Solutions Llc

Bankruptcy Exemptions In Nova Scotia

• No limit on clothes for you and your family
• No limit on fuel and food for your family
• Up to $5,000 in household furniture and appliances
• One motor vehicle up to $6,500
• All medical and health aids for you and your family
• Farm equipment, fishing nets, or other tools of your trade up to $7,500
• No limit on grain and seeds or livestock for domestic use by you and your family

For more information on bankruptcy exemptions in Nova Scotia, contact a local a BDO trustee near you.

Will Bankruptcy Affect My Spouse

The general answer to this very commonly asked question is:

No. As long as all of your debts are solely yours, then claiming bankruptcy should have no effect on your spouse or their credit rating. However, there are some unique circumstances. You need to ensure you are fully aware of all of the details on how claiming bankruptcy affects your spouse, prior to deciding if an Ontario bankruptcy is the correct choice for you.

You May Like: What Is Epiq Bankruptcy Solutions Llc

Exemptions For Accident Insurance Proceeds

You can keep insurance proceeds payable to you only up to the amount that your state’s exemption laws allow . Some states have generous exemptions for insurance proceeds received in a wrongful death or personal injury case. Other states’ exemption laws are more restrictive.

You might also be able to exempt additional proceeds by using a state or federal wildcard exemptionan exemption that allows you to protect any property of your choosing.

What Happens To Assets In Bankruptcy Will I Lose Everything

Bankruptcy offers you a fresh start. You are able to keep basic possessions and there are options to keep other assets.

Once you are legally bankrupt, bankruptcy law requires you to surrender your assets to a Licensed Insolvency Trustee. These assets will then be sold and the money earned will be distributed among your creditors.

You dont lose everything. Under Ontario bankruptcy law there is a list of items which are exempt from seizure, when going bankrupt in Ontario. These bankruptcy exempt assets include most of your personal and household belongings and tools used to earn a living and protection in the event your home equity falls below the set threshold .

Don’t Miss: What Is A Bankruptcy Petition Preparer

How Does Bankruptcy Affect My Life Insurance Premiums

Having a bankruptcy on your record could mean paying higher life insurance premiums than someone who otherwise has the same health profile but a stronger financial background. To make sure youâre getting the most favorable rates in the first two years after discharging your bankruptcy, you need to show that youâve established long-term income and stable assets that justify the life insurance coverage youâre purchasing.

If youâre healthy, donât smoke, and have no dangerous hobbies, youâll be assessed a life insurance classification of Preferred, which is one step below Preferred Plus, the most favorable classification. That means youâll pay lower premiums than someone in a lower classification, but slightly higher premiums than someone in Preferred Plus. In general, the further out you are from your bankruptcy discharge, the better your classification will be.

How To Save On Car Insurance If You Have Bad Credit

High-risk drivers can still save on car insurance.No two car insurance companies will have identical prices for the same policy. The difference in what you pay from one carrier to the next can vary by hundreds of dollars, sometimes more. So it pays to compare quotes even if you have bad credit.

Another option is to look into car insurance companies that specialize in high-risk driver insurance. For instance, Victoria Insurance, which specializes in such policies, increases rates by 38%, on average, for bad credit, Insurance.com rate data show. That’s nearly a third less than the nationwide increase of 71%.

Whether you have good, fair or bad credit, the same advice applies for car insurance — shop around. Get at least three quotes for the same coverage. Ask about discounts. With that information, you may be able to save hundreds from your car insurance each year.

Don’t Miss: What Is Epiq Bankruptcy Solutions Llc

How Long Does A Chapter 7 Bankruptcy Stay On Your Credit Report

After you file for a Chapter 7 bankruptcy, it remains on your for up to ten years and youre allowed to discharge some or all of your debts. When you discharge your debts, a lender cant collect the debt and youre no longer responsible for repaying it.

If a discharged debt was reported as delinquent before you filed for bankruptcy, it will fall off of your credit report seven years from the date of delinquency. However, if a debt wasnt reported delinquent before you filed for bankruptcy, it will be removed seven years from the date you filed.

What Type Of Bankruptcy

If you find out that your company is filing for bankruptcy, the most important question to ask is “which type?” There are two main categories of bankruptcy law under which a company can file: Chapter 11 and Chapter 7. Under a Chapter 11 bankruptcy, a company is able to financially reorganize itself and take cost-cutting measures, including layoffs or salary and benefit reductions, and continue operations. However, filing for Chapter 7 bankruptcy has much more direct and dire consequences for employees; the company shuts down completely and liquidates its assets to satisfy its creditors’ financial claims.

Recommended Reading: How To File For Bankruptcy In Wisconsin

It Is Possible To Make A Fresh Start With Discipline And Focus

Chip Stapleton is a Series 7 and Series 66 license holder, CFA Level 1 exam holder, and currently holds a Life, Accident, and Health License in Indiana. He has 8 years experience in finance, from financial planning and wealth management to corporate finance and FP&A.

• The Bottom Line

What does life after bankruptcy look like? When you’re considering this move, it’s important to look ahead before you decide your next steps.

People can find themselves at a point where there is no chance they will be able to pay off the debts they have accumulated. For example, consider someone who has depleted all their savings and maxed out all of their credit cards due to medical problems and losing their job. Even with unemployment or a temp job, they might find that they can no longer make even the minimum monthly payments on their cards or keep up with their rent and car loan. That’s when a helpful option is talking to a bankruptcy attorney. Chapter 7 could turn out to be the logical next move.

Unfortunately, this situation is all too commonin fact, Mark Twain, Walt Disney, Elton John, and Henry Ford all filed for bankruptcy at some point in their lives. If you think bankruptcy could be looming for you as well, read on to discover what you can expect and what to watch out for after filing for personal bankruptcy.

Its All About You We Want To Help You Make The Right Coverage Choices

Advertiser Disclosure: We strive to help you make confident insurance decisions. Comparison shopping should be easy. We are not affiliated with any one insurance company and cannot guarantee quotes from any single insurance company.

Our insurance industry partnerships dont influence our content. Our opinions are our own. To compare quotes from many different insurance companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about insurance. Our goal is to be an objective, third-party resource for everything insurance related. We update our site regularly, and all content is reviewed by insurance experts.

Filing for bankruptcy can affect the rates you pay for auto insurancealong with your other financial concerns. A bankruptcy affects your financial stability, and because insurance companies look at your credit score to determine the risk of insuring you, filing for bankruptcy could have serious implications for your car insurance.

Filing bankruptcy is going to give you a bad credit score and a higher car insurance rates.

You may not know it, but insurance, even car insurance, is a financial transaction. You are paying premiums on a policy, and in return for your payments, the insurance company is agreeing to stand behind your vehicle for the duration of the policy, regardless of what it ends up costing.

Recommended Reading: How To File Bankruptcy In Wisconsin

Car Insurance For Drivers With Bad Credit

Your bad credit may not affect your driving, but insurance companies say you’re more likely to file a claim. You’ll pay more — usually a lot more — for car insurance if you have bad credit.

No one wants to talk about bad credit. We get it. But the reality is, poor credit affects many aspects of life, including car insurance in most states.

Some car insurance companies will increase your car insurance rate if you have bad credit. Others are more friendly for those with bad credit, similar to .

More than 90% of insurance companies consider credit history as one of the factors when setting car and home insurance rates. Almost all states let insurers do this — except for California, Hawaii, Washington and Massachusetts, which ban the practice.

Insurers say loads of data show a connection between credit history and the filing of claims. People who pay their bills on time on average file fewer and less costly claims than those with a lot of late payments or delinquencies.

Insurance companies don’t consider the same credit score as lenders. They look at a score designed specifically for them. The credit score used by lenders predicts your ability to repay a loan. A credit-based insurance score predicts whether you’ll file claims.

• How to save on car insurance if you have bad credit

Why You Should Maintain Car Insurance During Chapter 7 And Chapter 13 Bankruptcy

Submitted by Rachel R on Tue, 11/22/2016 – 9:03am

Beware car insurance problems during bankruptcy!

Image Source: StockSnap.io

For consumers struggling with their finances and worried about a vehicle repossession on a financed car, bankruptcy can temporarily stop your creditor from proceeding with these actions. However, even after filing bankruptcy, you might face consequences if you dont take care of your insurance. Heres a look at the importance of keeping up with insurance requirements during your bankruptcy case.

Types of Insurance Required For Auto Loans

If you own a financed vehicle, there are usually specific insurance requirements in the financing agreement that lay out what type of insurance you need to protect the property. With a vehicle, its comprehensive insurancealso called collision coveragethat must be maintained with a fairly low deductible prescribed in the loan documents.

Comprehensive or collision insurance means that the car will be covered and repairs can be made for even the slightest fender bender. Those who own their vehicle outright can go with cheaper insurance known as liability coverage which has a higher deductible and less robust coverage. If you have an accident, liability insurance wont cover damage to your car, but it will cover damage to another vehicle if the accident is your fault.

Chapter 7 Versus Chapter 13 For Vehicles

Stop Repossession Today

Also Check: How To File Bankruptcy In Wisconsin

What If I Still Owe Money On My Car

If you have a loan on your car, make sure you notify your lender about the accident and provide them with the relevant insurance information. They should already know that youâre in an ongoing Chapter 7 bankruptcy, but it canât hurt to provide them with the information again.

Any property settlement youâll receive for the vehicle will first to go paying the loan. If the payout is greater than the loan balance, you will get the rest, up to the amount of the allowed exemption. Since cars lose their value so quickly, chances are you wonât get more than the loan balance plus the exemption amount. If you do, any payout above that amount has to be sent to the trustee.

If the insurance payout doesnât pay off the full balance of the loan, donât panic: your bankruptcy discharge will protect you!

If you initially planned on keeping the vehicle and reaffirming the car loan, you should update the court by filing an amended Statement of Intentions as explained in this article.

If youâve already signed a reaffirmation agreement, itâs important that you act quickly to rescind the agreement. You only have a short period of time to do so after the court approves it. Otherwise, you may end up on the hook for the loan balance that wasnât covered by your car insurance or any gap insurance you may have had.

Newfoundland & Labrador Bankruptcy Exemptions

In Newfoundland and Labrador, property exempt from seizure in bankruptcy is set by the provincial government and applies to the equity in an asset. Equity is the difference between the value of the asset and what you owe on the asset.

Example: If you have a car worth $6,000 and you still owe $4,000 on the loan, the equity you have in the car is $2,000. In Newfoundland and Labrador, the exemption for a car is $2,000. In this case, you would be entitled to keep the car and your unsecured creditors cannot take this from you when you file for bankruptcy.

Read Also: Which Of The Following Phrases Best Summarizes Chapter 7 Bankruptcy

How Much And How Soon Credit Scores Can Rise

Using data from Equifax credit bureau, researchers at the Federal Reserve Bank of Philadelphia found that filers Equifax credit scores plunged in the 18 months before filing bankruptcy and rose steadily afterward.

Among the findings:

• The average credit score for someone who filed Chapter 7, the most common type of bankruptcy, in 2010 was 538.2 on Equifaxs 280 to 850 range. By the time the filers cases were discharged, usually within six months, their average score was 620.3.

• The other type of bankruptcy, Chapter 13, requires a three- to five-year repayment plan, which most people dont complete. Those who did and got a discharge, though, saw their scores rise from 535.2 to 610.8, the Philadelphia Fed researchers found.

A recent study by FICO, the company that created the leading credit score, found much smaller gains. Median credit scores for people who filed for bankruptcy between October 2009 and October 2010 rose from the 550s before they filed to the 560s afterward, says Ethan Dornhelm, senior director for FICOs scores and analytics group.

After two years, 28% of bankruptcy filers had scores of 620 and above. After four years, 48% had scores of 620 or above, and only 1% scored 700 or above.

Common Questions About Car Insurance After Bankruptcy

• Does shopping for car insurance hurt my credit score?

  No. Insurance inquiries do not require a hard credit pull, which means they arent reflected in your personal credit report or score.

• What is the Michigan Farm Bureau customer service number?

  Yes. Insurance companies encourage updating your coverage to reflect changes to your life and finances, like filing for bankruptcy, adding or removing drivers or moving to a new address.

  If you cancel your policy, you may face a cancellation fee.

• Why do car insurance companies care about my credit?

  Several large studies by such research companies as Edmunds indicate that people with low scores get into more car accidents. But using your credit score to determine accident risk and, therefore, car insurance rates is a controversial practice thats led to three states banning the practice.

You May Like: When Does Chapter 7 Bankruptcy Fall Off Credit Report