Question: I need a car for work and have been advised to go bankrupt.
Can I Keep my car if I go bankrupt?
Answer: You can be allowed to keep a car in bankruptcy, but there are a few requirements for this:
One is that you have to show a need for the car, and needing a car for work is such a need.
Secondly the car must be of modest value, usually valued at less than 2K, but there have been instances where the car needs to be valued at less.
Lastly, the Receiver in your bankruptcy must approve any and all expenses associated with the car.
So based on the limited information you have given, I cannot say you would be allowed to keep the car or not.
The article below is from our web site and may give you a bit more insight into this.
I hope this has answered your question.
For more information and assistance, please complete our eligibility form at our web site www.bankruptcy.org.uk or ring us at 0800 0029951.
Keeping A Car Whilst Bankrupt
One of the questions I get asked quite a bit from people looking into bankruptcy as an option to be relieved of their debts is, can they keep their car if they go bankrupt?
A fair question I would say as most of us need a car to get around for work, or just to get from point A to point B.
Oddly enough, this question is asked more often than how will bankruptcy affect my future credit, which shows people living in the here and now, which is good, and the question regarding a vehicle is asked more often than how will my bankruptcy affect my partner or spouse.
So to me that shows many people are thinking more about their car, a material item, more than the love of their life; or it could be those that ask the car question already know the answer to the other question.
This could go on and on…
But for some people having a car is a necessity and required for their job, or the car is their job as in chauffeurs or taxi drivers.
The issue with keeping car during the period of your bankruptcy comes down to the Official receiver allowing you to keep the car, and this is based on a few simple requirements.
The first being you can show a need for the car: you work unsocial hours, or there is no public transport in your area or at the time you need to travel.
Some people reside in villages where there may only be one or two small buses that operate and even then only operate at certain, specific times.
People do need to get to and from work, and this is a valid reason.
You have medical or family issues that requires you to have a car.
You need to shuttle children to and from school as the school is a distance away and there is no other means of transport.
You or a family member has a medical condition which requires that you have reliable transportation at all times.
This also lends itself to the issue if you have a Motability vehicle, what will happen then??
It will depend on what Motability states about bankrupts having a vehicle, but to my knowledge it is considered a benefit and as such would be fine; and in most instances would be fine with the Receiver in bankruptcy as well.
If you need the car for work as it is a part of your work, a tool of the trade, so to speak, it can be fine in bankruptcy as well.
If you use your car for a vehicle hire service or as a taxi, and this is your job, the car can be protected under a ‘tools of the trade’ consideration.
For some it may be a van they need for work to transport their tools from job site to job site.
Another requirement is that the vehicle is of modest value: modest value is usually defined as valued at less than 2K.
Now we have been hearing of people not being allowed to keep a car that was valued at 1K, and not knowing all the details of this, it may have been they did not meet the requirement to show a need for the car and the Receiver wanted as much as they could get to be paid into the bankruptcy. There are a few factors involved and not knowing all the details, it is difficult to say why they were not allow a car.
For many people valuing the car is the tricky part. There are some web sites that will allow you to enter the details of your vehicle and provide you with an approximation of the value.
One thing that many of us do is to over-estimate the value of what we have, be it a car or anything.
In this instance you would not want to do this, but would want to get the closest, yet lower value for the car or vehicle.
What if the vehicle in question has financing on it: this can be the tricky part as there are a couple of issues here, one is the finance company, do they allow someone who is insolvent and bankrupt to keep the car?
In most instances as long as the payments are being made and are made in accord with the finance agreement for the vehicle, meaning they are current, many finance companies are OK with the person being bankrupt.
But the real issue is the monthly payment for the car. The Official Receiver has to allow this payment as a part of the monthly expenses allowed in bankruptcy.
And it is not just the monthly finance payment, but the insurance, MOT, tax disc, petrol, upkeep, etc.
The Receiver has to allow these in order for you to keep the car. So that is where it can be a bit complicated.
If the monthly payment is high, or the costs to run the car are high, and there are alternate means of travel, the Receiver may not allow the car in bankruptcy.
Another issue some people face is that they have access to a car, but it is not registered in their name, or the car is registered to them, but their partner or spouse pays the monthly payments.
These types of situations can vary and also get complicated.
One rule to know is that if a car or vehicle is registered in your name, meaning your name is on the log book, you own the car, so the Receiver could very well not allow it even though someone else may pay the monthly payments.
This would not mean you cannot use this or any other car, but if this particular car has a high value, and it is in your name, then the Receiver could want it sold to pay into the bankruptcy.
You will be asked if you have use of car, and this is fine, it is just for the Receiver to see if you are contributing to the expenses of having and running a car and then it will be the Receiver’s decision as to allow you to continue to make those contributions.
So while it can be a bit complex for some, you can be allowed to keep a car in bankruptcy.