Bankruptcy and Auto Insurance

Filing bankruptcy may not seem like the best option available. However, when you have no choice left, you will have to file for one. A lot of you may not have thought of filing for bankruptcy ever. However,the current economic situation may have forced you to think of bankruptcy as an option and a much needed step. Studies have shown an almost 34% increase in the rate of people who have filed for bankruptcy in the recent times. Chapter 13 Bankruptcy is more heard of now since people are resorting to it in order to be able to save their shelter in such a financial depression. Bankruptcy has an effect on your life and a long term one too. How will bankruptcy affect your auto insurance premium? If you file bankruptcy it will stay on your credit report for at least 7 to 10 years and yes it is likely that this will affect your auto insurance premiums. The auto insurance companies are likely to increase your premium after they know you have filed bankruptcy. How much the increased rate will be largely depends on the credit rating that you have had before bankruptcy. Some companies keep a check on your credit rating at least once a year and if they see a bankruptcy on your records they are likely to increase your premiums. Again, some companies usually do not check your credit rating if you continue to pay the premiums regularly without defaulting. Since bankruptcy stays on your records for almost 7 to 10 years, any company that uses credit ratings to assess risks may increase your premium rate. You may also be refused the lowest premium rates and some companies even refuse to offer a quote in such a case. This may not sound fair to you but many companies see this as a very important factor – as important as your driving history. Bankruptcy indicates the strong difficulty that you have with your finances and hence may see this as a risk factor for the company. What are the things to consider? If you have made timely payments to the auto insurance company, this could go in your favor. However, if you do decide to go through bankruptcy there are a few things you must take care of:

• If you pay your auto insurance premiums linking it directly to your debit or credit card, you must update your information once you decide to file for bankruptcy. Normally after you file bankruptcy the payments from your debit or credit card will automatically stop because the accounts are likely to be closed.
• Call the insurance company and link them up with the new payment details. If you default on any payment, the auto insurance company may increase your premiums.

Can you still find auto insurance after you file bankruptcy? Not all companies think the same way. So, it is likely that you will find few such companies who will be willing to insure your car even if you have filed bankruptcy. The reason being, these companies usually look at your payment history, your driving record, the place where you live, the type of car you own and other factors that they may want to consider. If they think that all of those factors or a considerable amount of those factors are in your favor, you may get insurance. However, you may need to shop around a little.