What happens to my Car if I go Bankrupt?

What will happen to my Car if I go Bankrupt?You are normally allowed to keep your car if you go Bankrupt. However it usually has to be worth £1000 or less.

  • Can you keep your car if you are Bankrupt?
  • What if it is worth more than £1000
  • Could you sell it before going Bankrupt?
  • What happens if it is on HP?

Want help to go bankrupt? Give us a call (0800 077 6180) or complete the form below to speak to one of our experts

Can you keep your Car if you go Bankrupt?

If you have a reasonable requirement for a car (for example to get to work, take your children to school or other family commitments) you should be allowed to keep one if you go bankrupt.

The only time you may not be able to keep a vehicle is if you do not need it. This could be because you walk or use public transport for your daily travel needs and just own it for pleasure.

Where this is the case the Official Receiver (OR) will usually ask you to sell it. The money from the sale must be given to them. Also as you no longer have to pay the running costs you may then be able to make payments towards your debts.

Even if your car is worth less than £1000 the OR is likely to ask you to sell it if they believe you do not need it and you cannot justify keeping it.

What if your Car is worth more than £1000?

The Official Receiver will need to understand how much your car is worth. If the value is less than £1000 (£2000 In Northern Ireland and £3000 in Scotland) you will be allowed to keep it as long as you need it.

However where the value is more than £1000 the OR must realise the difference. They will normally suggest you sell the vehicle and buy an alternative worth less than £1000. The money left over will then have to be given to them.

Alternatively you will be allowed to keep the vehicle if you know a third party who is able to pay the difference in cash to the OR.

If your vehicle is a tool of your trade it is exempt from Bankruptcy. As such you should be able to keep it even if its value is greater than £1000. The same applies if you have a special medical condition.

Could you sell your Car before going Bankrupt?

If your car is worth more than £1000 one option is to sell it before going Bankrupt. You can then use up to £1000 of the cash you raise to buy something cheaper.

You are allowed to use the remaining money to pay your Bankruptcy fee and reasonable ongoing living expenses. However anything left over will have to be given to OR.

You must ensure that you get market value. Keep any receipt you receive. If you sell the car for less than what it is worth this would be a transaction at undervalue. The OR could then recover it and sell it for a more realistic price.

Do not pay any of your creditors with funds raised from the sale of your car. This would be a preferential payment. Once you are bankrupt the recipient could then be forced to return the money you paid them.

What happens if your Car is on HP and you go Bankrupt?

If your vehicle is on a Hire Purchase (HP) or a lease agreement you must consider its net value. To calculate this take the actual value and deduct the outstanding finance.

If the net value is less than £1000 then you should be allowed to keep it as long as the monthly repayments are reasonable. If they are high the OR could still ask you to hand back the car to the finance company and get a cheaper one.

You must also speak to your finance company and confirm they would be happy to let you carry on with the agreement during your bankruptcy. Most will be fine as long as their payments are maintained. However some may not.

If you receive Mobility benefit and have a car through the Mobility scheme you can keep this. Mobility benefit and an associated vehicle are exempt if you go bankrupt.

Arrange a call with a Bankruptcy Expert

Need help with the bankruptcy process?


Privacy Policy
Your information will be held in strictest confidence and used to contact you by our internal team only. We will never share your details with any third party without your permission.

2 thoughts on “What happens to my Car if I go Bankrupt?

  1. Linda says:

    My son is struggling with his debt. I’ve told him to go bankrupt but he doesn’t want to loose his car which I paid for. I can prove I gave him the money to buy it last year. It is currently valued about £4ooo. Will it be at risk?

    I transfered the money from my account to my sons account and he went in to buy it.

    1. Hi Linda

      Generally speaking if you have paid for a car that your son uses on a full time basis it can still be argued that you are the owner of the vehicle. This is the case even if he is the registered keeper and pays to maintain and insure it. As such it is not his asset and it cannot be claimed by the official receiver (OR) if he goes bankrupt.

      Having said that in your situation where you gave him the money and he then used that to buy the car there could be a problem. If the OR wanted to be difficult they could argue that you simply loaned money to your son which he then used to buy a car. As such the car is his and you are simply one of his creditors (ie one of the people he owes money to). In this scenario the OR could then claim it as one of his assets.

      If you gave him the money on the same day as he used it to buy the car I would think that you could argue that the transaction was purely out of convenience and it was always the intention for you to retain ownership of the vehicle. However there is a risk that this will not be accepted. Worst case the OR will argue it is your son’s and then you will have to pay the difference between its value and £1000 for him to keep it.

      If you do not want to take this risk one option is for him to sell the vehicle before he goes bankrupt. He then uses the cash raised to buy one for around £1000 and uses the excess money to pay for a full service and year of insurance. He could then use the residual money to pay for the bankruptcy application.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.