What happens to my Car if I go Bankrupt?

What happens 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.

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Can you keep your Car if you go Bankrupt?

Given you need your car (e.g. to get to work, take your children to school or other family commitments) and it is worth £1000 or less, you should be allowed to keep it if you go bankrupt.

The only time such a vehicle might be at risk is if you really do not have a reasonable requirement for it. This could be because you walk or use public transport for your daily travel needs and just own it for pleasure.

If the Official Receiver (OR) believes you do not need it they will 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 vehicle 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.

There are some situations where you will be allowed to keep your car if it is worth more than £1000. These include where it is a tool of your trade or you have a particular medical requirement.

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 finance?

If your vehicle is on finance such as Hire Purchase (HP) or PCP (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.

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

    1. Neil says:

      How do I get a fair valuation for my car for bankruptcy purposes and how can I go about keeping it. We buy any car value it at £2500 and Parker’s value it at £3800 which is a huge difference. My children are willing to pay the reciever the difference over £1000 but we need to know how to come to a true valuation fair to both sides that is a realistic value

      1. Hi Neil

        Generally speaking Parkers / Auto Trader give a valuation which is top end. Vary rarely are these valuations achieved if you do try to sell, so for the purposes of bankruptcy this is unrealistic. Ultimately if the official receiver had to sell the car the price they would achieve at an auction would be closer to the WBAC.com value.

        Remember the quote from WBAC.com is the top end of what they would give you if you actually tried to sell your car to them. The OR would likely achieve less at an auction and incur auction costs. So in my experience the official receiver will normally be happy with the WBAC.com figure. As such if your car is worth £2500 I would say you can be fairly confident the OR will accept c£1500 for you to keep it after you go bankrupt.

    2. Dave says:

      Hi

      I’m considering bankruptcy as I am unfortunately unable to pay my credit cards and loans and a couple of things I have taken out my question is my wife and I are on our car finance agreement would the car have to be handed back

      1. Hi Dave

        The answer to this depends on a number of things. First is the car in negative equity? ie is the total outstanding finance greater than the value of the car. If so and the monthly payments are reasonable the official received will have no interest in it and as far as they are concerned you will be able to keep it.

        However you would also have to check with the car finance company to ensure they would still allow you to keep the agreement running (given of course you maintain the payments).

        Most car finance companies are happy as long as the payments are made on time. However some simply demand the return of the car. If this is the case then you have the option of handing it back prior to going bankrupt and getting an alternative. Any outstanding finance after the car is returned is included as a debt in the bankruptcy.

    3. Tricia says:

      I have a Mitsubishi Colt worth around £1200, but I need the vehicle as I have arthritis and I live with my friend who has cancer and a stoma, so we need the vehicle to attend appointments and such. She doesn’t and can’t use public transport, I am her registered career and she is unable to drive, if I declare bankruptcy will I lose my car?

      1. Hi Tricia

        Although the rules state that your car should be worth no more than £1000, the official receiver can use discretion in certain situations. In particular where there is a need for a vehicle due to a medical condition. As such even if you car is worth £1200 I do not think you have anything to worry about. I am confident you would be able to keep it if you go bankrupt.

        Also remember you should check the value on webuyanycar.com You can then take off a couple of hundred pounds from the value they give you for the inevitable knock downs they would come up with. Using this method you might find that the value of your Mitsubishi is actually less than you think anyway.

    4. Sadie says:

      My father has gone bankrupt his car is worth about £4000 they have said they are going to take the car however my husband is disabled and my father takes my husband to appointments and takes him out when I cant due to having 3 young children he also takes his grandchildren out so needs a reliable and big enough car to fit 3 carpets plus wheelchair in which his car does is there anyway round keeping the car

      1. Hi Sadie

        This is a difficult one. The official receiver will normally only exempt a vehicle worth more than £1000 if the owner themselves has a specific medical or business need. Given that it is not your father who is disabled but your husband I am not sure the OR will be able to help.

        You should certainly make your case to the OR by clearly describing the needs of the family. You never know you might be lucky. However according to the rules I think the £3000 in the car (the difference between £1000 and its value) will have to be realised.

        If the OR is unable to help then make sure you use the lowest possible amount to value the car (this is normally on we buy any car.com). Then your Father can keep it by paying the difference. If this is not possible then worst case it will have to be sold and your Father will be given £1000 to buy a replacement.

    5. Maxine says:

      Hi, We recently purchased a car for £1150 and are planning to apply for bankruptcy. The car is 2003 reg. will the car be taken because we paid over £1000 for it? How do they value the car? I’ve valued my car of several websites each give me a different figure. Some are less some are significantly more. Your advice will be much appreciated. Thanks

      1. Hi Maxine

        I do not think you have anything to worry about. I recommend that you go to webuyanycar.com and double check the value of your car on there. This is normally a realistic immediate sale price and is usually acceptable to the OR. Even if we buy any car say it is still worth £1100 I would be confident that the OR would not be interested in it. The margin between £1000 and £1100 is too small.

    6. Lee says:

      I’ve got a car on hp. I’ve got 2 years left to go into 5 year agreement. My car is worth around 2.5k / 3.5k. Personally I think towards the lower end looking at what there going for. I took this out on bad credit apr.

      I’m looking to go bankrupt but keep my car and continue to make the payments. I use it for work and also help grand parents with hospital appointments and do there shopping. Would you think it’s possible the or would agree to this if I go the bankruptcy route which is the way I want to go thanks

      1. Hi Lee

        Whether or not you will be allowed to keep your car will depend on 2 things. First the net value of the car. In other words the current value (based on a webyanycar.com type valuation) less the outstanding finance. If this is £1000 or less, the official receiver will have no interest in the vehicle. Second you need call your car finance company and check that they will be happy for you to continue paying for the car if you go bankrupt. If they are happy and the net value is £1000 or less there should be no problem.

    7. Nath says:

      Hi,

      Currently looking into bankruptcy. I have a late 1980s VW camper that into recently was running. It now needs engine work to get running again. I paid too much for it 18 months ago, I’ve since discovered it’ll soon need the bodywork restoring, a budget of about £8k is needed.

      As such, this is proving very difficult to value. Would the OR still be interested in it being a non-runner? I appreciate its a very specific situation, but would you be aware of how it would be valued? If I get it running, considering the bodywork issues may impact the ability to sell quickly, would they be interested then?

      Thanks

      1. Hi Nath

        The official receiver will take a view of the vehicle’s value in its current state. In other words what would it be worth to sell as it is.

        What they will then do depends on whether you need this vehicle to get to work. If you need it, you will clearly have to repair it. As such they will value it based on what it will be worth when it is running (not including the body work repairs).

        If you do not need the vehicle and it is a “nice to have” item then even if it is currently worth nothing they will insist that you sell it for what you can get. They will not allow you to have a vehicle sitting on the drive / road that is costing you each month in insurance and tax. It is the same if you register it as SORN. They will still insist it is sold for what it is worth as is.

    8. Tom says:

      I am currently considering bankruptcy as an option as I am struggling with debt since covid 19 took its toll.

      I am self employed, and cannot work my business so have been taking paye work to supplement it. I have a van worth about 1500 on we buy any van, although I’m sure it will end up being less as its scratched and dented. I have a photobooth that is hired out for parties as part of the business that is worth probably 1k to 1500, depending on how quick a sale I could get. Obviously if I lose these then I wouldn’t be able to carry on trading after covid.

      I also have a car, which is mine but my disabled partner mainly uses, worth 1350 on webuyanycar.

      My question is, would I lose my van if I declared BR, or would I lose the car?

      Ideally I need to keep both, so I have a means of working, but also so my partner can get around, as she can’t drive the van.

      How likely would it be that I had to dispose of one of the vehicles, and would they take my equipment off me, or allow me to keep it?

      These are the only real assets I own. Rented house, I have electrical items, TV etc, but nothing of real value and a lot of it is old.

      1. Hi Tom

        If you go bankrupt, the official receiver will find it difficult to allow you to keep two vehicles. There would be no problem keeping your van if you are going to need it for when your self employed business picks up. However if you keep the van they will not allow you to keep the car.

        That said, if you want to keep both it is possible. You would just need to “buy back” the car from the OR (paying the equivalent of its second hand value). Ideally these funds would come from your partner.

        In terms of the photobooth, managed correctly the OR should allow you to keep the this. However it would have to be carefully positioned. Before making the final decision and going ahead, I strongly urge you to speak to me first. I would be happy to give you more advice. I can be contacted on 0800 077 6180

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