Will My Auto Insurance Company Be Notified of My Bankruptcy?


If you're anything like the vast majority of Americans, you've been hit a bit hard by the changes in the economy over the past couple of years. You may have even found that filing for bankruptcy is the right option for you and, if so, you should find comfort in the knowledge that you are not alone. Your next question, as you try to rebuild your financial life, may be this: "Will my auto insurance company be notified of my bankruptcy?"

The simple answer to this question is "no" but this answer would be misleading. Your auto insurance company will not be notified of your bankruptcy via a notice from the court, like your creditors would be, but they will find out about it. Here's how.

First, you have to consider your credit report. Many of today's standard auto insurance carriers now run credit reports and use your credit score when determining whether or not to give you coverage and what rates they will charge you. When they run your credit report they may not necessarily see the bankruptcy itself but they will see your low score and will either charge you a high rate or deny you coverage.

The next way that your auto insurance company can be notified of your bankruptcy is through the answers you give on your application. Insurance companies can and do ask you if you've ever filed for bankruptcy as part of the application process. You must, by law, answer this question truthfully. The company you are requesting a quote from may, upon realizing you have not had a good financial history, decline to even offer you a quote.

So what can you do if your auto insurance company is notified of your bankruptcy? Be honest and upfront about any questions the underwriter may ask. If you have a long standing history with your current carrier and have made your payments on time despite your difficulties, you may be able to convince your carrier to allow you to keep your coverage.

If not, you'll have very few options. The carriers who will insure you are likely to charge very high rates and your best bet will likely be the insurance plan run by the state in which you reside. The rates will be high but they can guarantee you coverage until your bankruptcy is no longer affecting your credit score or insurance application.

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