Why Do I Need to Provide Proof of Insurance to my Bankruptcy Attorney?

January 21, 2022
Why Do I Need to Provide Proof of Insurance to my Bankruptcy Attorney?

Some of our clients are surprised when we ask for proof of insurance on cars, homes, or other assets. We usually don’t spend a great deal of time in initial meetings or appointments to prepare bankruptcy paperwork asking about insurance.  The answer is that insurance can matter a great deal to what happens after the bankruptcy is filed.  We’ll give several examples.

Example 1

We file a Chapter 7 bankruptcy and a car lender asks the court to lift the bankruptcy automatic stay (the protection in place from creditor action) to repossess a car because our clients haven’t paid in several months.  We may be able to work out a deal to allow our client to keep the car.  But if the client doesn’t carry the required coverage on the vehicle, the Bankruptcy Court is going to be quite concerned and upset and most likely side with the lender.

Most car purchase agreements require the borrower to carry full insurance coverage on the vehicle until the loan is paid off.  That’s not only for the protection of the driver/borrower but more importantly for the secured lender.  Creditors have rights, and those rights in bankruptcy include “adequate protection”.  Typically that means receiving proof of insurance when requested along with consistent payments on the debt.

Example 2

We file a Chapter 11 Plan of Reorganization for a small business. The business has several employees, a modest parcel of land, and equipment.  It is going to be extremely difficult to convince a court that our business can reorganize and thrive if it fails to keep necessary coverage for the land, equipment, and employee-related insurance (like worker’s compensation) along with any general liability insurance.  That varies from business to business, of course.

Contact WM Law

If we ask for proof of insurance early on in a case, or even months into a reorganization, don’t be alarmed. We’re here to fight for our clients and that means producing the right information to let our clients keep the property they want to keep and keep their businesses in the business. For more information, visit our website at www.kansascitybankruptcy.com or call for a free initial consultation to evaluate your situation.  At WM Law, we are here to help.

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