The idea of going Bankrupt can be very worrying. Not least because you may be concerned that your personal belongings will be at risk of being taken from you and sold to pay for your debts.
In reality this is simply not the case. Of course if you have any items which are particularly valuable you may have to sell these. However your everyday household belongings are not at risk.
We will look in more detail at the things that your will be allowed to keep and the things that you might not if you use this debt solution.
What happens to my household possessions in Bankruptcy?
You do not have to worry about losing your household possessions if you declare yourself bankrupt. One of the worries that people have is that a man in a white van is going to turn up at their house and take away all of their things but this is just not going to happen.
You are allowed to keep all of your reasonable belongings including your clothes, furniture, white goods, TV, DVD and stereo equipment and your computer or laptop.
In fact the rules say that the Official Receiver is not allowed to take any of your reasonable household belongings which are not worth more than the cost of their replacement. Because the second hand value of most if not all of your household items is going to be less than the cost of replacing them they will not be taken from you.
Are valuable belongings at risk if I go Bankrupt?
The only time any of your belongings are at risk is if they are extremely valuable and would fetch more than their reasonable replacement if sold.
The simplest example of these types of belongings would be valuable antiques, paintings or jewellery (although not a wedding ring). If you have any of these types of items when you declare yourself bankrupt, you must declare them and understand that they may have to be sold to raise money for your creditors.
BMD Tip: Often people worry that they might have a valuable item because they have an expensive TV or computer which they bought recently.
The reality is that in today’s world these are consumable goods. As such their second hand value would be much less than the purchase price and the official receiver will simply not be interested in them.
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What will happen to my car in Bankruptcy?
You may be allowed to keep your car if you declare yourself bankrupt. However this will depend very much on your personal circumstances.
If you need your car for work or you have a reasonable requirement for a car due to other circumstances (perhaps children) then it is likely that you will be able to keep it as long as it is not worth more than £1000 (£3000 if you live in Scotland).
If your car is worth more than £1000 then you might be required to sell it and buy a cheaper vehicle. Alternatively a third party could pay the difference between the value and £1000 to the official receiver allowing you to keep the vehicle.
If your car is worth less than £1000 this does not automatically mean that you will be allowed to keep it. You will only be allowed to do so if you need the car for work or another reasonable requirement. If you do not need the car the official receiver may still demand that you sell it.
BMD Tip: If you have a mobility car you will be able to keep this even if its value is more than £1000.
What happens to my work tools if I go Bankrupt?
If you are self employed and have tools which are necessary to carry on your business these are known as the tools of your trade and you will be allowed to keep these if you declare yourself bankrupt. For example if you are a plumber and you have tools and equipment to enable you to carry out your work, then these belongings will not be taken from you.
You are also allowed to keep a vehicle that you use for work even if it is worth more than £1000. So if you have a van which is critical to allow you to work it is extremely unlikely that this would be taken away from you.
The rational is that if you were forced to sell the things that allow you to work then you would no longer be able to earn a living and would have little or no chance of making any payments towards your debt which would be counter productive.
BMD Tip: If you have valuable tools which you no longer use or need for your work the Official Receiver will normally require you to sell these.
What will happen to my house if I go bankrupt?
Bankruptcy does not necessarily mean that you will lose your home. If you are renting or your property has no equity in it then there will normally be very little to worry about. However if your property has equity or the value of the home is likely to increase then it could be at risk.
BMD Tip: If you are a home owner you need to think very carefully before you decide to declare yourself Bankrupt.
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