Bought a car from bankrupt person?

MickF_3

Hi there,

I bought a car from a bankrupt guy, unknowingly, 6 months ago. I couldn't believe my eyes when I received a letter from the insolvency practitioners stating I was a 'beneficial owner'?? of the vehicle and I have to deliver it to them immediately or they will come for it themselves. They also state that I will incur all costs.

Surely this can't be right?

Thanks in advance for any replies.

JCS1

If the person was BR at the time of selling the car, they had no legal right to sell the vehicle as the asset vested in the OR - and the OR can overturn any such sale (by going to court if necessary).

The important thing will be the date of the sale compared to the date of the BR. You can check their BR date on the insolvency service website:

http://www.insolvency.gov.uk/eiir/

And if they were already BR, please speak to the CAB for advice.

peachyprice

Hi Mick, did you buy the car vastly under the market value?

If so unfortunately the OR has the right to either ask for the car back, or will more likely do a deal with you for payment somewhere towards the difference. The person who sold you the car may have been found by the OR to have disposed of an asset.

The best you can do is phone the OR and see what agreement you can come to.

Was the person a friend, or a complete stranger?

MickF_3

Hi there,

Thanks for the rapid response. I do know the guy, but didn't know he was bankrupt. He has changed phones etc since the sale. The price was pretty much normal for the market at the time. Surely it's down to him? He has done something illegal not me?

JCS1

Unfortunately, if he was BR when he sold you the car then it wasn't his to sell - the comparison is someone selling a car on HP and not paying off the HP company, the HP company would go after who had the car currently.

Please speak to CAB tomorrow.

MickF_3

Ok. Thanks again.

crow

The OR can investigate transactions of a bankrupt up to 2 years before he went bankrupt. Any transaction can be overturned and either the goods recovered by the OR, or a deal done for the difference.

As said, if the seller was insolvent at the time, then unless he dispersed the funds raised fairly to all creditors, then it can be overturned.
Sometimes, even when the seller was solvent at the time, the transaction can be overturned, eg if there was any attempt to hide the money raised, then that also is an offence, and if preferential treatment was given to a creditor, then that is also an offence. You can see the logic, someone with some valuable assets decides to dispose of them and hide the money, or hide the assets for a later date.

A common cause is that of undervalue, eg, when goods are sole cheap. The suspicion is that a deal may be done to buy them back later, or it was an attempt to hide the money or get a creditor who was pressing off their back to allow them to continue in their actions which allows debts to increase to the detriment of other creditors.

There's loads of stuff on the insolvency service web site, and do a search of antecedent recovery, there is a load of stuff that explains it, including a technical manual:
insolvency gov uk / freedomofinformation / technical / TechnicalManual / Ch25-36 / Chapter31
/ part4/Chapter31 .4 . htm

There is a section that explains undervalues, and one bit that's important says basically that a transaction that was done in good faith and where fair (I think it says) consideration is given, then the transaction will be allowed to stand. Basically, that means if what you paid for it was fair (which depends on the time you bought it [lok atthe housing market now], the location, [eg, some areas are more affulent and the residents can/will pay more], type of sale - private add/auction etc) then it's ok.

People talk about 'market value' which is a theorectial value placed on somethng, somewhere at some time. The true value is what someone is willing to pay at the time you want to sell and under the terms you will accept. eg, the book value of a car may be £3000. 2 people may enquire. One offers £2500 cash on the spot. The other phones and says, he'll go up to £2800 but he has to get a bankload and that will take 2 weeks. what is the value of the car?

The bit about fair consideration is requred in contract law. Basiacally, when you sell something, you receive 'consideration' payment, gift, or the removal of a negative thing. (they fix your garden wall instead of giving money). In return for that consideration, you transfer the title (ownership, right to enjoy ) to that person. if you do not receive adequate consideration, then the contract is not made, and even if the 'buyer' takes the stuff away, he hasn't bought it, as no transfer of title occurs because the contract failed. What is a fair consideration in a contract has long since been the subject of debate in contract law.

Now, basically, unless there is a benefit to the creditors, the OR won't pursue it. Yes, he may rattle his sabre, but if he has to spend time and money pursuing it, and the extra money recovered will not cover the fees, he won't/can't because he is working for the creditors benefit.

I think you need legal advice as it is potentially very complicated. You can ask on what grounds the transaction is challenged, That will give you a starting point. If the seller had already petitioned the court, then it wasn't his to sell, but the OR is still after the best deal for the creditors.

Obviously, if the car is taken off you, you have a civil case against the seller............... but you won't get far will you? I don't know if, in the event the car is taken, you will get your money back...... I suspect not, but I know there is a prhase in the link above that suggests the intention is to turn the clock back, iwhich may mean yo get your monet back, the seller gets the car, which is then disposed of for the creditors.

from what you say, it sounds like the seller sold the car and the money not put to good use, and the OR is acting like he has circumvented the creditors. good luck