Filing Bankruptcy And Dealing With Insurance

By Author: Norris Rios
Total Articles: 572
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During the last two years many people who have never though about bankruptcy before have found it as a necessary step to cope with the consequences of the economical crisis. It's not something that means that you have failed completely anymore. Only during the initial phase of the crisis there was a drastic increase by 34% of persons filing for Chapter 13 bankruptcy as the only possible option to protect personal assets such as households.

Why using Chapter 13 bankruptcy in the first place?

Chapter 13 is different from the common Chapter 7 bankruptcy as it allows organizing debt payouts in a way so that the personal assets of the person filing for this type of bankruptcy are not affected or used for paying out debts. Chapter 13 bankruptcy (also referred to as Individual Debt Adjustment) allows the person to kip all his personal belongings and pay out the debts during a specified period of time, usually 3 to 5 years. During this period the debtor is protected from any claims that the creditors may file, which is a very good option if you have some assets you want to protect. Still, such protection comes for a price ...
... and it may seem like a small one to pay initially, but in the long run it only gets bigger.

What escapes the attention of those who file for Chapter 13 bankruptcy is that any form of insurance and loans will come at a higher cost than before. And over time these costs will make up the actual price of using this form of financial protection.

Why does bankruptcy affect insurance rates?

When you're getting car insurance quotes or applying for a home loan most insurance and lending institutions will use your credit report in order to assess the risk they are taking by working with you. And your credit report will be severely affected by bankruptcy, persisting for up to 10 years after you've filed for bankruptcy. Your credit rating will drop and it will be much harder for you to find affordable insurance or loans, if any at all.

How will bankruptcy affect my car insurance quotes?

The degree of impact Chapter 13 bankruptcy will have on your insurance rates and quotes depends on how good your credit rating was before you've filed for bankruptcy. If it was good enough, you will typically face a minor increase in insurance rates, and in some cases it may remain the same. However, if you already had problems with your credit record then a bankruptcy entry will certainly force your insurance rates and cost of any types of loans to rise substantially. That is, of course, if the company you got car insurance quotes initially uses credit rating in the process of calculating your rates.

What to do id filing for bankruptcy is the only option?

First of all, make sure to check your payment options with all insurance providers that you've previously paid using a credit card, as through bankruptcy most of your credit lines will be closed. In situation like this it's best to have an insurance provider that doesn't rely on credit ratings when calculating rates. So you may want to take your time and look for home, health and car insurance quotes from providers who make part of this group of insurers. They are not as numerous, but still there are plenty of companies to choose from.