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Car insurance?

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  • Car insurance?

    This might sound like an odd question...
    I live in PA and I'm planning on filing for a Chapter 7.
    My car insurance is supposed to renew in August.
    Will my rates skyrocket now? I haven't had an accident or ticket in quite some time. How much has bankruptcy effected your car insurance rates?

  • #2
    Hey there! Filing a bankruptcy should not affect your rates for car insurance. If you have an accident or ticket then obviously it will, but not by filing a bankruptcy.


    • #3
      Originally posted by mchanning View Post
      Hey there! Filing a bankruptcy should not affect your rates for car insurance. If you have an accident or ticket then obviously it will, but not by filing a bankruptcy.
      In our case, after filing chapter 13, the insurance premiums for both home and auto policies increased by around 25 percent. We had been with the same company for several years and had not filed any claims. had speeding tickets or any adverse events. When I contacted the insurance company to ask why the increase I was told it was because of the hit our credit score took after filing. I shopped around with several companies and brokers to see if we could get better rates but had no luck. I believe there are insurers that don't use credit scoring but I had no luck with that either. I believe each state has it's own rules concerning the use of credit scoring as a factor to set premiums.


      • #4
        How much and if your rates increase because of BK will depend on your insurance company and state. My rates didn't go up because California is one of two states that prohibit insurance companies from basing rates on credit scores. Massachusetts is the other. Consumer Reports has a lot of information about insurance rates, including state by state details of how credit scores affect rates. According to their research, in PA, where Habesnicht is, an new single adult customer with a clean driving record and poor credit will pay $2,258 for a policy that somebody with excellent credit would pay $1,088 for. Somebody with excellent credit and a DWI would pay $1,893. Muneco is in Texas where a driver with poor credit would pay $3,426 for a policy that the same driver with excellent credit would pay $1,338 for. With excellent credit and a DWI conviction, the driver pays $2,435.

        It really does not seem fair that somebody with a DWI conviction would pay less than somebody with a clean record and poor credit.

        There are apparently companies who do not check credit scores. If you get a big rate hike, you might try searching the web for those companies and seeing if you do better. But, I bet their rates start higher in the first place.
        LadyInTheRed is in the black!
        Filed Chap 13 April 2010. Discharged May 2015.
        $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!


        • #5
          Originally posted by mchanning View Post
          Hey there! Filing a bankruptcy should not affect your rates for car insurance. If you have an accident or ticket then obviously it will, but not by filing a bankruptcy.
          This is NOT true if your company uses a credit rating system to set your rates. Ours does.

          OP, I have talked to our agent because this was a big fear of mine. He said they only run credit about once a year, and not necessarily when our policies are renewing. He told me that if we do see an increase, it would be 10% the first year, and maybe another 10% a year later. Don't ask me to repeat his explanation, because I have no idea. But it may be worth asking your agent, just do you can know how they do things and prepare for it.


          • #6
            I am in New Jersey and have NJ Manufacturers Insurance Company. They do not use credit scores . I have been with them 50 years for all my insurances.
            There must be another company that doesn't use credit scores to determine premiums. Look around.


            • #7
              I think PA uses credit scores, which is where I live. You're giving me yet another reason I wished I lived in NJ, which is about 20 minutes away from where I live! I wish I could afford it there.

              My car insurance expires in August and I wonder if I should wait to renew it (and maybe pay a few months in advance if possible) before filing for bankruptcy. My insurance isn't super-high because my car isn't worth much and my driving history isn't' bad, but I'd rather avoid the possibility of being gouged if I can.
              I think it's incredible that they can charge people more who have poor credit-- it's as if our culture likes to "punish" working poor people and nickel and dime them more than anyone else. For example, my insurance company tacks on a huge access fee on my insurance if I pay less than a year in advance. Another example would be my WF bank account, that charges me $10 a month simply for having a balance that's lower than 1,000. I've had that account since 1998, before it was Wachovia. I remember when they charged nothing as long as you didn't bounce checks.
              Someone who has poor credit could have a perfect driving record. I see more Mercedes and BMWs driving over 90mph on the highway and doing reckless illegal things than old beaters. And they wonder why so many poor people drive uninsured... you already have low wages, gas eats up a larger percentage of your income, and then you have to pay more just to maintain your legal driving status.


              • #8
                I had no idea this was the case. I can't wrap my head around exactly why it would need to be true either. You either pay your insurance policy or you don't, and you pay in advance. So why a rate increase for poor credit? Does having poor credit mean you're statistically higher risk for an accident?

                I would think poor credit means you're more likely driving a beater, more likely performing your own oil changes and more likely to have some higher sense of gratitude for your vehicle!

                I guess its a small price to pay in the big picture of a discharge of debt. Not much makes sense about being able to run up a debt then have it forgiven either.


                • #9
                  Good thoughts, OP.

                  Years ago ~ long, long before we had any thoughts of bankruptcy ~ our insurance agent told me about the scoring system they use. He said you can fall into one of three rate categories based on your credit: A, B, and C. I believe he told me we were a C at the time. I was completely confused by this -- because we had never, ever, ever paid anyone or anything late. Really.

                  This was the first I'd ever heard that your credit can affect your insurance rates. His explanation was: "They figure if people have a lot of debt, they are a bigger risk because they have a lot on their minds and they may be more likely to get in an accident."


                  When we unload all of this debt we have, we will have a much lighter load on our shoulders and on our minds. But then we will get a rate punishment from the bankruptcy. And really, that's all it is. We have never paid them late, and we both have been with this same company for 20+ years. They will suddenly charge us more for insurance, simply because they can.


                  • #10
                    I suppose, to an underwriter, the risk of fraud probably goes up a little for someone with bad credit. If they're having money trouble, they're more likely to do something shady to get "insurance money." Not ACTUALLY likely, mind you, just more likely than someone who isn't having financial difficulties. Whether that risk justifies a 25-30% increase in premium, I can't say, I'm not an actuary or underwriter.

                    My rates went up shortly after filing, but I also bought a new-ish car right after filing I can't really say what the cause was. I do note that as my credit went to hell over the last 2 years my rate gradually creeped up about 5%
                    This post does not constitute legal advice. If you use this advice instead of that of a lawyer, God help you.
                    Filed CH 7: 5/11/17 341: 6/12/17 Discharge: 8/14/17


                    • #11
                      Meh, I suppose the risk of fraud is possible for someone who has financial problems, but I'd think a criminal background check would be a better indicator of that.
                      Still, if I've gone through bankruptcy recently, it's not like I have 30,000 in credit card debt that I need to pay off.
                      I'm wondering if it would be better for me if I somehow managed to pay a large portion of it in advance in August, so my rates wouldn't be astronomical for the upcoming year.


                      • #12
                        Thinking more about it-- I suppose it's absurd to really worry about in the long run. Two or three more months of credit card minimums would be greater than what I'd be charged per year in car insurance.


                        • #13
                          I filed in January, my insurance was renewed later that month, and it stayed almost exactly the same. I was discharged in May, insurance was just renewed again, and my 6 month premium went up by $45. That extra $7.50 per month is way more manageable than paying thousands in credit card minimums.


                          • #14
                            Hopefully it doesn't "cost" too much!

                            I think it's hilarious that they'd charge more for bad credit. Granted, filing for BK is a sign of "irresponsibility" and therefor might justify a higher rate, but being "irresponsible" comes in many forms... Texting while driving, divorce, not going to the dentist, underemployment, having a criminal record, having misbehaving children, being obese, driving with two pit bulls in your car, being 80 years old and blind in one eye white driving... One would think a person with no official debt who's just filed for BK would be less of a "risk" than someone with a huge mountain of debt and decent credit (who might therefor be tempted to commit insurance fraud).


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