One of the areas of most concern if you are thinking about Bankruptcy is whether or not you will be forced to sell your things to raise money to help pay your creditors.

One of the primary worries that people have about going Bankrupt is they they will be forced to sell their worldly goods. For most people however this is simply not the case.

In reality the majority of people keep most if not all of their things and are only forced to sell some of their assets in very specific circumstances. We explain which of your belongings you will be able to keep  and which if any you would be taken away from you.

Will I have to sell my household belongings in Bankruptcy?

The short answer to this is no. If you declare yourself bankrupt you will normally be allowed to keep all of your reasonable household items. As such it will be perfectly OK for you to keep all of your furniture, clothing, kitchen appliances and electrical equipment.

The only time when any of your belongings might be considered an asset and brought into question is if you own anything of extreme value. If you own any valuable antique furniture or art then of course you may be expected to sell this to raise funds to help repay your creditors.

However even in these circumstances you will not be left without furniture. You will be allowed to retain some money to pay for replacing the very expensive items that are sold with more modest things.

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What happens to your car in bankruptcy?

If you specifically need your car for work and family use then generally after declaring yourself bankrupt you will be able to keep it as long as it is worth less than £1000.

If your car is worth more than £1000 then the official receiver can force you to sell it as an asset and buy a cheaper one. The excess funds will then have to be paid towards your debts.

It may be possible to keep a car worth more than £1000. However a third party will normally have to buy the difference between the value and £1000 back from the OR.

BMD Tip: If you do not need you car because there is no work or family requirement or reasonable public transport is readily available you may find that the Official Receiver (OR) will ask you to sell it and put the proceeds towards your debts even if it is worth less than £1000.

What happens to your house in bankruptcy?

If you are a home owner your property is one asset that will be considered very carefully if you are declared bankrupt. However it is not true that your home will automatically be sold from under you. What happens to your property will depend on the amount of equity in it.

If there is significant equity in your property then your home is at risk. Where this is the case, declaring yourself bankrupt may not be advisable. However if your home has little or no equity, then it is extremely unlikely that the Official Receiver will tell you that it has to be sold as there would be little gain from going through with such a sale.

BMD Tip:  The OR can hold on to the interest in your home for up to three years. After this time if house prices have risen significantly they may still want to sell your home or at the very least put a charging order against it for the value of the equity. As such if you feel house prices are likely to rise you must take further advice.

What happens to your work tools in bankruptcy?

If you need certain tools and equipment that you own in order to be able to work (known as the tools of your trade), then these will not normally be treated as an asset in Bankruptcy.

You will be allowed to keep tools and equipment so that you can continue to undertake the work that you do and hopefully generate income some of which may be used for repaying your creditors.

BMD Tip: Work tools are not just limited to equipment. Such tools could extend to a work vehicle which you will still be allowed to keep even if it is worth more than £1000.

If you own any tools or equipment that you no longer use or require to undertake your job these will not be protected and you are still likely to have to sell these.