Car options in bankruptcy

breakingbadhabits

Hello everyone, first time post on here but ive been reading daily for a few years now.

Im seriously considering bankruptcy in the next few months and just have a few car worries as i need a car for work, my current car is worth more than 1000 so doubt they would let me keep it, my family have offered to buy a car and let me use it during the bankruptcy, just not sure how that would work out with monthly payments for fuel and insurance etc and all stay legal and keep everyone happy.

thanks for any help you can give

thinkpositive1

breakingbadhabits wrote: »

Hello everyone, first time post on here but ive been reading daily for a few years now.

Im seriously considering bankruptcy in the next few months and just have a few car worries as i need a car for work, my current car is worth more than 1000 so doubt they would let me keep it, my family have offered to buy a car and let me use it during the bankruptcy, just not sure how that would work out with monthly payments for fuel and insurance etc and all stay legal and keep everyone happy.

thanks for any help you can give

Hi BBH and welcome

This issue (car valuation - what can you keep) has been up there in my thoughts and considerations going bankrupt. I posted a query up on here recently and had a few advice tips from people on the site.

How much more than £1k is your car worth?

I want to keep the car I have (10 years' old and all paid off) but am worried as was aware it might be worth £3k to £4k and most on here thought that would definitely be "of interest" to an Official receiver as an asset and £1k is the threshold. But there is some room for negotiation.

I have had advice from CAB, Business Debtline, a bankruptcy solicitor, my Insolvency Practitioner (I am in an IVA plan) and they all seem more relaxed thinking I would in all likelihood be allowed to keep it.

I understand everything is assessed case by case but I emailed the Insolvency Service and had this very helpful advice:

If a bankrupt owns a vehicle outright,the official receiver/trustee will have to decide whether it is an asset in thebankruptcy or if it is exempt property. Exempt property is something youown that cannot be claimed as one of your assets and sold to help pay yourcreditors.

For a vehicle to be exempted undersection 283(2)(a) of the Insolvency Act 1986, they will have to show thetrustee that it is necessary:

• for their personal use in their employment, business or vocation; or
• to meet a basic domestic need of themselves or their family.

The bankrupt must convince theirtrustee that a vehicle is necessary. If the bankrupt cannot do so, and thetrustee has not exempted the vehicle, they will treat the property as apotential asset and deal with it in the most suitable way for the benefit ofthe bankruptcy estate.

Even if the trustee agrees that a vehicle isessential, they may still sell it and provide the bankrupt with a suitablecheaper alternative, under section 308 of the Insolvency Act 1986. Thisis likely to happen where the vehicle is worth more than £1,500. The trusteemust provide the money for the replacement vehicle from the saleproceeds. Official Receivers have been given a guideline maximum figure of£1000 allowance for a replacement vehicle. If a bankrupt believes theyneed a more expensive vehicle, they would need to fully explain why and theirtrustee will decide whether or not this is appropriate.

For more informationplease read our publication “What will happen to my motor vehicle?” which isavailable from our website: www.bis.gov.uk/insolvency

So the guidelines appear to be: if it's worth over £1.5K and you want to keep it the OR may be open to negotiate this. If they don't exclude it from bankruptcy and they take it as an asset they give you £1k back to buy a car.

I have had my car valued and have various figures given from £1,600 to £2,500. I feel more confident of keeping mine now I know that and whilst this goes against the experiences of some on here, the "relaxed advice" I have had is along the lines of OR's being very up to the ears in casework, not really wanting too much hassle of taking car off your hands for a quick sale via an auction if it's going to generate a few hundred quid.

Others may shout that advice down and I may found out I lose mine in discussion with the OR but that quote above is direct from BIS's Insolvency Service direct to me the other day.

Hope this helps.

breakingbadhabits

Thanks for this helpful advice, I'll just see what they say when the time comes. Good luck with you're BR.

debt_doctor

Hi,


If the vehicle is exempt as an asset in BR, then the OR will consider raising money to the BR estate if the vehicle is worth more than £1k. If the BRs work or other reason requires a 'better vehicle' then that will be considered on it's merits.
Sale of the vehicle will only tend to take place when the sale can generate at least £500 to the estate - hence the £1500 figure.
For vehicles (exempt and for 'normal use') worth over £1000 but less than £1500 then the OR will still be looking to realise the difference, often in practice to allow the surplus to be paid by instalments - I have seen this happen several times.


DD

SteveABC

My car was worth £1500 at time of BR and I was allowed to keep it and it wasn't classed as an asset. This was three years ago, so not sure if things are still the same now.

Also not all ORs do exactly the same - I think mine was quite fair/lenient.

Good luck.

longtermplanner

breakingbadhabits wrote: »

my family have offered to buy a car and let me use it during the bankruptcy, just not sure how that would work out with monthly payments for fuel and insurance etc and all stay legal and keep everyone happy.

There are two separate issues here which tend to be confused.

If you need a car for your work, you will be allowed monthly payments for fuel, insurance etc when the OR is assessing the level of an IPA. This applies whoever owns the car.

If you own a car that you need for work, you will only be allowed to keep it if it is less than blah blah blah.

See the difference? So you should be fine if a relative buys it and the OR agrees you need it for work.

tigerfeet2006

SteveABC wrote: »

My car was worth £1500 at time of BR and I was allowed to keep it and it wasn't classed as an asset. This was three years ago, so not sure if things are still the same now.

Also not all ORs do exactly the same - I think mine was quite fair/lenient.

Good luck.

The figure for a car used to be £2K and is now £1K. Also different OR's will interpret the guidelines differently.

breakingbadhabits

Thanks for the replies it is of great help at this time.

My brother has offered to buy me a car as mine is a MOT failure and on its last legs, how would he go about doing this so i can keep the car when i go bankrupt possibly part exchanging mine or selling it to raise bankruptcy fees,

Thanks for any help with this matter