How to go bankrupt and keep your car
When you apply for bankruptcy, all of your significant assets are likely to be sold and used to repay a portion of your debts. These include property and vehicles which may have to be sold or given up.
It is sometimes possible though to go bankrupt and keep your car. However, this depends entirely on your financial situation and how the Official Receiver views your circumstances.
We understand how important having a car is. They give you independence, ease and freedom to travel where you need to. Below are details of some circumstances in which you may be able to keep your vehicle.
If you own your car outright
If you purchased your vehicle and own it outright, the Official Receiver may let you keep it if it is essential and isn’t valuable enough to be considered an asset.
When could the Official Receiver consider your vehicle to be essential?
- If you can’t do your job without your vehicle – For example, if you drive it to deliver items or travel to and from jobs as a sole trader.
- If you can’t get to work or school without it.
- If you or someone who lives with you has a disability.
The Official Receiver may look at public transport options and taxi services in your area, and if they believe you can use these to get around – and your vehicle is not deemed essential as per the criteria listed above – they may not allow you to keep your vehicle. This means they will arrange for your vehicle to be sold.
If your vehicle is considered essential but is of reasonable value – usually if it is worth more than £1,000 – the Official Receiver may ask you sell it and buy a cheaper vehicle instead. The money gained from the sale of the vehicle will then be put towards paying back your debts.
Could you sell the car yourself?
Not once your bankruptcy order has been made, as the vehicle will belong to the Official Receiver. However, if a friend or relative can pay the Official Receiver the money you would receive from the sale of your vehicle, you may be allowed to keep it. However, this is decided on a case-by-case basis so if you would like to try this option, speak to your Official Receiver first.
Your vehicle was given to you under the Motability scheme
If your vehicle is paid for via your disability living allowance, personal independence payment or attendance allowance, you will be allowed to keep your vehicle throughout your bankruptcy. This is because it does not belong to you and so ownership cannot be passed to the Official Receiver.
What if your car was obtained through a hire purchase agreement?
If you chose to take on a hire purchase agreement, the vehicle is not yours and belongs to the lender until you have made all of the repayments.
You may be able to keep the vehicle and continue to make repayments on it if it is deemed to be essential. The same rules apply as to what the Official Receiver considers to be essential, as listed above.
You should also check your hire purchase contract to see if there is a cancellation clause if you are made bankrupt. If this is the case, the lender will need to decide if you are allowed to keep the vehicle or if they should repossess it.
Can you keep your car if someone else purchased it for you?
If the vehicle was purchased by someone else, such as a family member or partner, but you are listed as the registered keeper, then you will need to provide proof that you are not the owner and did not fund the purchase. If you cannot prove someone else bought the car then the Official Receiver may sell it.
What if you have a personalised number plate?
Personalised number plates can be valuable, so your Official Receiver will have it valued to determine if it is worth selling. If it is considered valuable they will offer you the opportunity to either sell it to a third party or buy it back.
The sale of your assets is something you should be aware of before taking on bankruptcy. If you wish to keep your car you can consider these options and work with your Official Receiver to see what can be done.