If I go Bankrupt what happens to my Vehicle?

One of your key concerns about bankruptcy will probably be what happens to any vehicle you own. Bankruptcy may offer a number of advantages. All of your unsecured debts will be taken away from you and you will no longer be responsible for paying them. However non of this will matter if there is a risk you will have to give up the vehicle such as a car or motorbike you need every day.

Is my Vehicle at risk if I go Bankrupt?

The good news is you are allowed to own a car, motorbike or other vehicle when you are bankrupt as long as you need it for reasonable transportation purposes. These could include getting to and from work and other family commitments.

However the value of the vehicle will generally have to be £1000 or less. If it is worth more the Official Receiver (OR) has to realise the difference. This does not mean you will have to give up having a vehicle altogether. You have different options.

A third party (perhaps a member of your family or friend) could pay the OR the difference. You would then be able to keep the vehicle. Alternatively you could sell and buy one for £1000 or less. Any surplus must then be paid to the OR.

BMD Tip: The only time when you will be able to keep a vehicle worth more than £1000 is if it is specifically needed for the job you do or you require it for medical reasons.

What if your Vehicle is on HP?

If your vehicle is on HP or finance, the official receiver will normally be happy for you to keep it and continue to pay the finance agreement as long as the net value is less than £1000 and the monthly payments are reasonable.

However, you need to remember that the finance company will be informed once you have declared bankruptcy. Some vehicle HP and lease agreements state that a car can be repossessed if you declare yourself insolvent.

BMD Tip: It is a good idea to confirm with company that they will be happy to allow you to continue with the finance agreement if you are declared bankrupt. If they say no then at least you know where you will stand and can consider alternative solutions.

Take bankruptcy advice

Declaring bankruptcy can be an extremely good way of dealing with an unsecured debt problem. After 12 months you will be discharged and your debts written off. However, you need to consider a number of things very carefully and take expert advice.

One of these is where your car is concerned. In general, you will be allowed to keep a vehicle worth up to £1000 if you need it. However, if you own a vehicle worth more than £1000 you will need to plan how to deal with this before going down the bankruptcy route.

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