When you’ve been declared bankrupt, control of your estate (money and assets) will pass to the Official Receiver (OR). This will include any vehicles you own, such as a car, motorbike or van. The OR will decide whether you can keep the vehicle or if it should be sold for the benefit of your creditors. This article from personal insolvency experts, Bankruptcy Clinic, covers some of the questions that the OR will consider in relation to your car.
Is the vehicle essential to your lifestyle?
If you need a car to get to and from work, or driving is part of your job, you should be allowed to keep the vehicle. The same applies if you need the car to take your children to school, or if someone in your household needs to use it because they’re disabled. However, except in the case of disability, you’ll need to show that it isn’t possible for you to undertake these essential journeys using public transport. The OR will look at the bus, train and tram services in your area, as well as costs, when making their decision.
How much is the car worth?
If the OR lets you keep your vehicle, you may be required to trade it in for a cheaper model, with the difference being distributed to your creditors. However, this won’t be necessary if the car isn’t worth very much – generally £1,500 or less. If you do have to sell the car, the OR will allow you to use £1,000 of the proceeds to buy a cheaper one (but only if the vehicle is classed as essential).
How will the OR value your car?
The OR will use a car price guide to work out the value of your vehicle. For vintage or unusual cars, they may need to take specialist advice or ask an agent to value it on their behalf.
Can you choose to sell the car yourself?
No, because the OR now owns it. However, you could agree with the OR to sell the car to a friend or relative who’s happy to let you keep using it. In this case, the third party will need to pay the car’s value directly to the OR.
What if the car is subject to a Hire Purchase (HP) or conditional sale agreement?
In these cases, you don’t own the car until you’ve finished making all the payments to the finance company. The OR may let you keep up the finance agreement if they feel that the car is essential to your lifestyle (see above).
If you complete all your payments during your bankruptcy period, the car will belong to the OR and they may sell it for the benefit of your creditors. If the agreement ends after you’ve been discharged, you can keep the vehicle. However, some agreements contain a cancellation clause if you’re made bankrupt. If this happens, it’s up to the lender whether they let you keep the car or have it repossessed. If they let you keep it, ownership will pass to the OR.
Sometimes, the OR will order the finance company to collect the car and end your agreement earlier, if there would be no benefit to letting it continue.
What is your vehicle is part of the Motability scheme?
If you pay for your Motability vehicle through benefits such as Disability Living Allowance, Attendance Allowance or Personal Independence Payments, then this is a lease agreement. You don’t own the car, so the OR can’t sell it. If the vehicle is subject to a Hire Purchase or conditional sale agreement, then this may be allowed to continue as long as you keep receiving the relevant benefits. However, Motability could decide to repossess the vehicle as a result of your bankruptcy.
What happens to your personalised number plate?
The OR will have your number plate valued, to find out if it’s worth selling. If it is, the OR should give you the option to buy it back or sell it to a third party. In either case, a third party must fund the sale.
What if you’re the vehicle’s Registered Keeper, but didn’t buy it?
The OR will assume that the car’s Registered Keeper is also the owner, unless you can prove otherwise. You’ll need to provide evidence that someone else paid for the vehicle or gave you the money to buy it. If this isn’t possible, the OR will treat the car as your property and it could end up being sold.