I’m writing tonight to let you know the recent news about automobile insurance refunds and how that impacts people in bankruptcy or who are considering bankruptcy as a lot of clients and friends are. Here’s what you need to know:
Many Major Insurance Companies are Issuing Refunds
State Farm, the country’s largest auto insurer, is giving customers a 25% credit between March 20th and May 31st. Allstate and Liberty Mutual are both issuing 15% refunds on premiums. GEICO announced that they are going to issue a 15% credit that will be applied to your renewal if it comes up between now and October (and a 15% credit on new policies in that same period). American Family Insurance is issuing a onetime $50 refund per vehicle covered by their policy. Farmers Insurance and 21st Century Insurance are giving drivers a 25% reduction in April premiums and USAA is giving a 20% credit for two months of premiums. This is great news for a lot of people because every dollar counts right now.
What if Your Insurance Company Hasn’t Announced a Refund?
Some experts have suggested that you call your insurance company. You have leverage right now. They want to keep you as a customer, and they know you’re not driving much right now. Remind them that your premium is based on the mileage they expected you to drive, and you’re not doing that. Even if they won’t give you an outright refund, they may be able to give you other incentives, such as waiving late fees, lengthening grace periods, or providing credits on your next renewal. There’s no harm in calling. Just be nice and see what they will offer. If the answer is no, hold tight. They may start feeling the pressure from the big insurance companies and do it anyway.
Don’t Worry About This Refund and Chapter 7 Bankruptcy Eligibility
Although, technically, these refunds are returning your disposable income to you and will need to be considered in the Means Test calculation for Chapter 7 eligibility, we are not worried about fitting these into your means test budget analysis. The companies offering money-back refunds are making a one-time refund that won’t have a great impact on your overall budget. The companies offering credits or rebates are of even less concern because the credit or rebate is not “cash in hand” that you can spend on other things. Either way, we can work it out. Just give us a call if you have any concerns about filing a Chapter 7 bankruptcy.
You Won’t Have to Give the Refund to Your Chapter 13 Trustee
Again, these refunds are technically returning disposable income to you and you’re supposed to turn over any disposable income not accounted for in your plan. But you and I both know that you’re spending a lot more these days and making a lot less. If the Trustee were to ask for the refund, we would simply respond with an analysis of your changed financial circumstances during this crisis. So, don’t worry. We have you covered. Like your stimulus check, we recommend using these refunds for essentials – groceries and medicine – and save any extra that you can. If you’re struggling to make your house, car, or plan payments, let us know right away.
I hope this information comes as good news for you. If you have any good news to share or are struggling and need help, please send us a note. As always, email is the fastest way to get a message to me and senior staff.
Together, we will get through this.