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What Happens To A Car On Finance I Sold Before Becoming Bankrupt?
Question:
Hello,
A friend has a situation, he had a secured loan on a car and sold it to pay some of his debt. Therefore the vehicle still has finance outstanding. He is now in the process of becoming sequestrated/bankrupt. After this goes through and his debts are ‘cleared’ will the outstanding finance on the car still be present (aka the finance company still have legal ownership/title) or will it be removed as it would be part of the debt in his sequestration/bankruptcy? Does the finance company still have a legal right to then go after the car with the new owner? He is concerned the person he sold it too will have to then deal with either repossession or to pay the remaining debt.
Answer:
In bankruptcy/sequestration all his unsecured debts will be placed, the financing for the car is technically still secured even though he has sold the car.
This becomes more of a legal issue as he may want to seek advice from a solicitor and also speak to the finance company as depending on the terms of the financing, the car may not have been his to sell.
If was able to sell it then yes, any shortfall would be unsecured and included in the insolvency proceedings.
Thank you for letting me help you.
Jon
If you have a bankruptcy question you’d like to ask, just ask using this online form. All help is free.
Source: What Happens To A Car On Finance I Sold Before Becoming Bankrupt?