Bankruptcy and Car Insurance

I’m back after a long hiatus, and bankruptcy questions have been piling up. This one is about bankruptcy and car insurance. Understandably would-be filers are asking “does bankruptcy affect car insurance”?

In most states it can. This is because most states allow car insurance companies to factor in credit scores when determining rates. So, a bankruptcy could very well raise your insurance premiums. Or, you may even be denied coverage.

However, I think it’s necessary to point out that the vast majority of folks who file bankruptcy have a lousy credit score to begin with. It is rare for a filer to have an acceptable credit score, much less a stellar one. In fact, filing bankruptcy might even raise credit scores for people who haven’t been paying their bills.

Also, some states, such as California and Massachusetts, forbid the use of credit scoring to determine your rates. Many other states have tried to fight it also, but, in the vast majority of states, using your credit score for insurance purposes is still legal.

Some companies (again, except in states where this is illegal), can drop your auto policy if you are in default on a debt you have with them. For example, I had USAA insurance and I also had a USAA credit card that I included in my bankruptcy petition. Because I live in California, USAA could not drop my car insurance, but they would have if I lived in a state that allowed it.

It's just wrong that if you file bankruptcy, car insurance companies are able to use your credit score to charge you higher rates or deny you coverage, even if you’ve never lapsed. Fortunately, there are still plenty of carriers that do not use credit scores to determine eligibility or rates, regardless of where you live. For the best rates, you just need to shop around. You can even get a car insurance quote online.

As always, this and other issues regarding your bankruptcy should be discussed with a competent bankruptcy attorney. I am not a lawyer.

Good luck to all who need a fresh start,

ep

What Is Reaffirmation?

What is reaffirmation? You may be interested to know that a reaffirmation agreement in bankruptcy may allow you to keep your car or house.

A reaffirmation agreement is an agreement between you and your creditor to keep your loan and your property, despite the fact that you are filing bankruptcy. You do need to continue to make the payments on time, and reaffirmed debts will continue after your bankruptcy is discharged until the loan is paid off.

This can be advantageous when filing a chapter 7 bankruptcy in which you wish to keep your car or home. While a chapter 7 bankruptcy can relieve you of the debt that you have, without a reaffirmation agreement, secured property will be repossessed or foreclosed on.

Reaffirmation is voluntary for the lender though they almost always agree if you are current on your loan payments, because they would rather get their money than not.

You may have other options to keep your property or it may not be a good idea to try and keep it. So much depends on your own unique circumstances and that's why it's so important to consult a good bankruptcy attorney. See my tips for choosing the best attorney.

I hope I've answered the question: What is reaffirmation?!!!

Good luck with your fresh start!

Bankruptcy And Spouse Liability

Bankruptcy And Spouse Liability

Are you thinking of filing bankruptcy by yourself and want to know how the bankruptcy will affect your spouse? Or do you you want to know how your spouse's bankruptcy will affect you? A few things you should know about bankruptcy and spouse liability...

Can one spouse file bankruptcy? Yes. You are entitled to file bankruptcy individually but it can have varied effects on your spouse, depending on your circumstances.

You will be protected by the automatic stay in bankruptcy when you file, but your spouse will not be. If you and your spouse have no joint debts, then your spouse will not be liable for any debts that are yours alone and included in the bankruptcy.

However, if you have jointly co-signed on loans, then your spouse is still responsible for the debt, even if a discharge is granted to you. A creditor could come after your spouse for debts that you include in your bankruptcy. The exception to this would be if you filed a chapter 13 bankruptcy, in which 100 percent of the debt is to be paid back over time. Only then will your spouse be protected.

Credit reporting agencies may report the bankruptcy on your spouse's credit report, if your spouse has co-signed on any of the loans.

If you own property with your spouse and you live in a community property state (California is a community property state), it is possible that the property could be sold and the funds used to pay off creditors.

Your bankruptcy can affect future credit worthiness for any transactions that you and your spouse attempt jointly.

Of course, it can be more complicated than this depending on variables unique to your circumstance. That is why it is so important to discuss filing bankruptcy without your spouse with a bankruptcy attorney, which I am not.

Wishing you all a fresh start,

ep