Gap Insurance and Bankruptcy
Gap insurance is usually offered on a car loan and it is intended to cover the difference between what you owe on your car and how much the car is worth. Do you need gap insurance?
In most cases, an auto insurance policy is sufficient protection to cover the cost of repairs or replacement. However, if the value of your car is lower than the amount you owe on your loan, the gap insurance will cover the difference. Gap insurance is offered in car purchases and leases. Gap insurance is used mostly in situations where you have a negative loan balance from a car you traded in when you purchased or leased your new car.
You do not need gap insurance if you will not owe more than your car is worth during the terms of your loan or lease. You can determine the value of your car by looking at the value of the last year’s model of car you are buying. You can look at Kelley Blue Book valuation online at www.kbb.com. If you decide to buy gap insurance, shop around and choose the best coverage for you. In most cases, gap insurance has no real value and should not be purchased.
If you are purchasing a car while you are in Ch. 13 bankruptcy, you must first obtain bankruptcy court and trustee approval. Most trustees do not approve a car loan if there is gap insurance on a car loan.
If you file bankruptcy, depending on the date you purchased your car, you might be able to modify the terms of your car loan. If you purchased your car within 910 days prior to the filing of your bankruptcy, the refinancing might be limited to the interest and the length of repayment, however, if you had purchased the car longer than 910 days prior to the date you filed your bankruptcy, then there are more flexibility in refinancing your car loan based on the value of the car, the terms and balance of your car loan.
Call our office today to schedule a consultation to discuss your situation, including any issues regarding an IRA, with Attorney Mina Nami Khorrami.
The within statements are general in nature and this information is not intended as a substitute for legal advice regarding your specific case, nor is an attorney-client relationship established between Mina Nami Khorrami, LLC and any person reading this information. Mina Nami Khorrami is an experienced bankruptcy and debt attorney based in Columbus, Ohio.