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Why Car Insurance is Important During Chapter 13 Bankruptcy

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Chapter 13 bankruptcy can help consolidate your debt so you can repay it, usually over 3 to 5 years. Your monthly payments will depend on your income since the plan is income-based, and while Chapter 13 can put you on the right financial path, it typically means making sacrifices in the short term.

One of the most common things people scale back on is making their car insurance payments. This may seem like a necessity at the moment, but maintaining auto insurance during bankruptcy is more important than you may think.

If you are struggling with your finances and think bankruptcy may offer some relief or you’re in danger of losing your vehicle during a Chapter 13 bankruptcy, contact our Cleveland bankruptcy lawyers for help. Call Cleveland Bankruptcy Attorneys at (216) 586-6600 today for a free consultation about your options.


While bankruptcy is supposed to help move you toward financial stability, it can also wreak havoc. You’ll understandably look for ways to save money, but some expenses should remain factored into your budget. Vehicles, for example, can be repossessed if the proper car insurance is not maintained.

What Type of Insurance is Required in Bankruptcy?

When it comes to cars, a bankruptcy court typically requires that “full coverage” insurance be maintained if you owe money. It makes no difference if money is owed for purchasing the vehicle or for a loan on the title.

Full coverage means both collision and comprehensive are included in your policy. The plan must also identify the lien holder. To prove that you have the proper insurance, you must present the court with a declaration page that lists this information.

What Happens if Car Insurance Lapses During Chapter 13

Failing to maintain coverage on your vehicle can have serious effects. If your vehicle loan creditor discovers that the car does not have full coverage, they will likely object to your Chapter 13 plan.

When an objection occurs, the court may allow you 10 days to obtain full coverage. If collision and comprehensive coverage are not purchased within this time frame, the creditor may be granted relief provisions. This means the creditor will get permission to repossess your vehicle.

In some cases, you may be forced to purchase full coverage car insurance through the court as an alternative to repossession. This insurance is expensive and only covers the lender. Being pulled over with court-provided insurance does not satisfy Ohio requirements for liability coverage and would result in a ticket for improper coverage.

How Your Bankruptcy Lawyer Can Help

At Cleveland Bankruptcy Attorneys, we understand how frustrating this process can be and how to deal with creditors. Creditors may halt the process, and even try to take away your possessions. As part of your bankruptcy plan, we can help you keep full auto coverage so your creditors cannot repossess your vehicle.

Because of the severe consequences, legal representation is essential during bankruptcy. Our Cleveland bankruptcy lawyers can advise you, and bring you up to speed on the dos and don’ts of Chapter 13 bankruptcy. With our help, you can go through the process with confidence.

Call us at (216) 586-6600 today for a free consultation. We will stand by you every step of the way to ensure that your bankruptcy filing goes as smoothly as possible.

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