If you fail to maintain insurance on your motor vehicle, the MVA will levy substantial fines and ultimately suspend your registration. Here are a few tips to avoid the penalties.
Turn in Your Tags
All insurance companies must report to the Motor Vehicle Administration every time you cancel your insurance policy. This means that when you switch insurance policies, your old insurance company will notify the MVA which will then send you an FR-19 form for your new insurance company to complete to verify coverage. If your car is totaled in an accident, towed, or sold, you cannot cancel your insurance until you turn in your tags or you will have a lapse in coverage. Make you turn in your tags and get a receipt!
You will be fined $150.00 for the first 30 days of the lapse and then $7.00/day thereafter. This means that if your policy lapses for 180 days, you will get a bill for $1,200.00! Some people get a bill for several thousand dollars! Your best bet if there has been a lapse is to immediately insure your vehicle to minimize the damage.
You Can Fight the Penalties
There are ways to fight the penalties if you get a letter stating there has been a lapse. You can prove your vehicle was insured during the time period. You can also provide a certified statement and evidence acceptable to the Administration that the vehicle was not operated during the period of lapse, was not involved in an accident or collision during the period of lapse, was not issued a citation during the period of lapse, and had no prior insurance lapse. You will need proof such as a statement from the junk yard or buyer of your vehicle, affidavits from people with knowledge of these facts, and other evidence. You can also provide written verification from the Maryland Insurance Administration that you paid the proper premiums to an insurance agent, insurance broker, or insurance company, who failed to provide motor vehicle liability insurance.
You Can Work Out a Payment Plan
The MVA has the power to "red flag" your registration so that it cannot be renewed or to suspend your registration. You can agree to a payment plan where you pay monthly installments toward the balance due and the MVA will lift the red flag or suspension so long as you are making payments. There are significant additional fees you will have to pay on the installment plan.
You Should Consult With a Bankruptcy Lawyer
You should speak with a bankruptcy attorney to see whether the penalties may be dischargeable in bankruptcy. (I am not a bankruptcy attorney and you should consult with a bankruptcy attorney about this issue).
You Can Be Sued If You Do Not Resolve the Issue
The MVA does sue people if they do not pay the penalties. They could ultimately get a judgment and post-judgment interest accrues at the rate of 10% per annum. A judgment will go on your credit report. For these reasons, ignoring the problem will make it worse.
You Could Receive a Traffic Citation for Failure to Maintain Security
Even if you get your car insured, it is a traffic violation to let your insurance lapse. You could be cited for failure to maintain security which carries a fine.
For all of these reasons, make sure to nip the problem in the bud and get your vehicle insured right away if there is a lapse. Do not let the problem linger.
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