UPDATED: Mar 13, 2020
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Times are tough, there is no doubt about that. The global economy is bringing more wealth to the rich and taking more and more wealth from the poor and middle class. With an alarming number of people declaring bankruptcy these days, many are lost when it comes to knowing how it will affect almost every part of their lives.
Auto insurance is one of those things that every driver in America needs. In fact, it’s illegal in pretty much every single state in the country to drive without it (sans New Hampshire). Although we all hate paying our insurance bills, the fact is, if you plan on getting behind the wheel in the United States, you’re going to need auto insurance.
Filing for bankruptcy, however, can greatly affect what you will be paying for auto insurance, but not everyone needs to worry. Below, we will try to clear up the air on auto insurance and bankruptcy.
There are 2 major types of bankruptcy; chapter 7 and chapter 13. The form of bankruptcy you file under will have a large impact on your credit score, and in turn, your auto insurance premiums. Of course, filing for bankruptcy should be your last resort. A bankruptcy filing will remain on your credit history for 10 years and will have profound negative effects on your credit rating.
Chapter 13 bankruptcy is the ideal choice of the two for an individual. It will grant the person 3-5 years of protection from creditors but will allow them to keep many of their assets, while they pay back creditors. This can play a huge role in your ability to pay bills, as well, including your car insurance bill.
Can I Get Auto Insurance with a Bankruptcy on My Credit History?
The chances of getting denied coverage due to a bankruptcy are slim, but you are likely to see a rise in your premiums. Thankfully, there are countless ways to save on your auto insurance rates, so even if you do go bankrupt, you can most certainly take advantage of other discounts to keep your rates low.
Will My Auto Insurance Premiums Definitely Be Affected?
As you could have guessed, filing for any type of bankruptcy protection can really hurt your credit rating. What you may not have known is that your credit score can greatly affect your auto insurance premium. There is no umbrella answer to this question, as each insurance company has their own guidelines. If you appear to be a financial risk to your auto insurance provider- you are likely to see a hike in auto insurance costs.
Your credit score is a great way to gauge one’s responsibility, very similar to the way a driving record is used to determine a driver’s monetary risk to an insurance company.
Again, not everyone will see the same changes. There are a few things you can do to fight the chances of a rate increase. Those that pay their premium on-time, every time, are far more likely to retain their current rate, than those that have had a spotty payment history.
Other Things to Consider
Get ready for a slew of changes to your financial status in the United States if you decide to go through with filing bankruptcy. Not only will your insurance premiums see a change, but you will most likely have a more difficult time applying for apartments, getting credit cards, and even getting a cell phone.
If you have your auto coverage payment linked to a credit or debit card, don’t forget to update your information. In most instances of bankruptcy, credit cards and checking accounts are likely to get closed. Therefore, don’t forget to contact your auto insurance provider, and link them up with new payment details. If a payment fails your credit may take another hit and your rates may continue to increase.
The most important thing for you to do now is to get a handle on your finances and begin the process of recovery. Most experts say that it takes 18-24 months to rebuild your financial health after a bankruptcy. There is no better time to get started rebuilding your finances than the present. Good luck!