Possible Consequence of Filing Bankruptcy on Your Auto Insurance Rates

The present world economy has been really tough over the last couple of years. Many people found themselves without a job or possibly get a pay cut. When these things happen, bills tend to pile up and debts are left unsettled. Sometimes, the person is forced to file for bankruptcy because of the never-ending pressures coming from different financial institutions. However, it is always best to exhaust all factors before doing so. Filing for bankruptcy can have an immediate effect on your financial and credit standing including getting auto insurance. That is why you really have to be aware how bankruptcy affects auto insurance rates before you even consider filing for one.

Bankruptcy has two major types. One is Chapter 7 and the other is Chapter 13. These two types have different effects to your credit score and even your car insurance premiums. Always remember that filing for bankruptcy will continue to reflect on your credit history for as long as a decade and this could have profound negative effects when you apply for loans and even for auto insurance.

Many people prefer Chapter 13 bankruptcy to be an ideal choice between the two types of bankruptcy filing. Perhaps this is because the person will be granted 3-5 years protection from financial companies who may go after the individual to get the payment for their loans. They will also be allowed to keep a lot of their current assets even while they are paying back their creditors.

If filing for bankruptcy cannot really be helped, then perhaps this is your option. However, you have to make sure you have exhausted all means like going into debt settlement schemes, consolidation and even credit counseling. Bankruptcy, even if it is Chapter 13 will not spare you from the effects that it brings to your credit as well as your chances on purchasing low-premium auto insurance rates.

There is a possibility that you will get denied coverage and this is one way on how bankruptcy affects auto insurance rates. These are isolated cases but it is possible. You might not experience this but you will surely have slim chances of getting low premium rates for your auto insurance.

While filing for bankruptcy can help protect you from your creditors, it cannot protect you from the rising costs of insurance premiums. Insurance companies actually use your credit report as a way to calculate the risks involved when you buy insurance from them. When they pull up and see that you have actually filed for either a Chapter 13 or a Chapter 7, these insurance companies will see that you are a higher risk candidate compared to other policy holders.

Each insurance company has their own guidelines, in which case you need to check with them first before you make the necessary predictions. Nevertheless, this trend is most likely to happen in a lot of cases with people who may have ruined their credit scores due to the filing of this bankruptcy status.

An individual's credit score is what most insurance companies use to gauges the person's responsibility which is actually similar to how a driving record is utilized in determining the equivalent monetary risk of the driver to the insurance company. That is why if you have a low credit score, you have greater risks than any other person applying for car insurance.

This scenario would most likely happen, however, some people who are consistent in paying their existing car insurance on time all the time, were able to retain their existing premium. This is not always the case, but you can certainly take a shot at this method to try and keep your insurance premiums lowered down.