Bankruptcy and Car Insurance
Bankruptcy and Car Insurance What Do They Have To Do With Each Other : One day I had the opportunity to meet with a client who was considering filing for chapter 7 bankruptcy in the Southern District of Iowa.
While discussing his monthly living expenses, I asked the client if he had car insurance. The answer is no. It reminds me of a married couple who didn’t have car insurance when they filed for bankruptcy and didn’t mind it after they filed. I want to share their story with you.
In 2003 the couple filed for chapter 7 bankruptcy in Des Moines, Iowa. Everything went smoothly. The couple accepted their release and were released from their debt.
Shortly after filing for bankruptcy, husband and wife got off to a good start and started making decent money. About two years after they filed for chapter 7 bankruptcy, the couple were able to secure financing for a $200,000 home.
Everyone is looking for husband and wife – but we know that I wouldn’t be writing this if all was well.
In 2007 the wife was involved in a car accident. Unfortunately, the wife caused the accident. He hit a motorcyclist who was not wearing a helmet. I’m not sure the cost of the medical treatment, but the last time I checked it was over $300,000.00. Let’s be clear -accidents do happen and that’s why we have car insurance. This is where things get bad for the family.
A lawsuit was filed against the couple for damages from a car accident. Things get expensive. Eventually, the couple came back to me for financial help. I asked about car insurance and husband and wife just looked down and mumbled that they had no insurance when the accident happened.
The client wants to know if the bills involved in a car accident can be waived in bankruptcy. I told them I had good news and bad news for them.
The good news is that unless the wife intentionally caused the accident (I don’t think it would be an accident if she accidentally hit the motorcyclist), or was under the influence of drugs or alcohol when she had an accident, the bills related to the car accident could run out in bankruptcy. . .
The bad news is that the couple was unable to pay off the debt under article 7 of the bankruptcy law until 2011. The debtor had to wait eight (8) years between filing for article 7. This news upset the couple and you could see the concern in their eyes. that they would lose everything they had worked so hard for.
That’s not the end of the story. There is more good news and more bad news.
The next good news is that this couple is probably the luckiest person I’ve ever met. It turns out that they are eligible to file for chapter 13 bankruptcy.
Debtors only need to wait 4 (four) years after filing for bankruptcy to file for chapter 13 bankruptcy. Not only are they eligible, they are eligible for chapter 13 bankruptcy because they have disposable income to pay for it. . their creditors. So it seems that the bankruptcy court may absolve some of their liability. But…
Remember that I told you there was additional bad news?
The pair are required to pay the Chapter 13 trustee a total of $2,294.64 monthly for the next 60 months. In addition, they must submit all tax refunds received for the next five years.
State law requires all drivers to be insured when they operate a motor vehicle. As a society, we want people to be held accountable when they cause accidents.
We don’t want people to be punished for being in an accident and that is why congress and courts are giving individuals who actually had an accident a chance to make a fresh start under bankruptcy court.
Imagine how much money this couple would save each month if they had just purchased the appropriate amount of coverage. I tell this story to everyone I meet who doesn’t have car insurance. These clients have nothing to lose – almost everything.
Please obey the law and remember to keep your car insurance up to date to protect yourself financially. And, of course, if you have questions about insurance and bankruptcy liability, be sure to contact a qualified bankruptcy attorney in your area.
Sam Marks graduated from Drake Law School after completing undergraduate work at the University of Iowa. After graduation, he developed a general law practice that includes work in criminal, family and child law. Over time, he began to focus specifically on bankruptcy and consumer protection.
Sam is often asked to lecture lawyers, business professionals, and the general public on the topic of bankruptcy and consumer protection and how these issues affect other aspects of the law. He enjoyed these presentations and the opportunity they provided to discuss current events regarding the legal system.