Buying a car before bankruptcy?

Tofferino

Hi there,

I'm after some advice please.

I recently wrapped up my limited company. We have the creditors meeting shortly and that will be it.

I'm also looking at personal bankruptcy within a matter of weeks as I have stacks of debts due to various reasons.

I luckily walked straight into another job after leaving my company so I'm instantly back in full time employment but I won't earn anywhere near enough to service my debts. My salary is greatly reduced compared to what I was drawing down form my business.

The issue I have is that I have a vehicle that I'm currently using that belongs to my company. I'm going to lose this within the next week or so. It's aprox £16k to purchase it from the finance company. I don't have the money but I need a vehicle.

Can I go and purchase a vehicle at around £6-8k before I declare bankruptcy? Something with reasonably low monthly payments. I know that once I file for bankruptcy I'll be able to make the payments quite easily. I basically need a vehicle otherwise I'll not be able to work which would surely be worse for everyone? My credit rating is currently very good.

Thanks in advance.

Brock_and_Roll

Tofferino wrote: »

Hi there,

I'm after some advice please.

I recently wrapped up my limited company. We have the creditors meeting shortly and that will be it.

I'm also looking at personal bankruptcy within a matter of weeks as I have stacks of debts due to various reasons.

I luckily walked straight into another job after leaving my company so I'm instantly back in full time employment but I won't earn anywhere near enough to service my debts. My salary is greatly reduced compared to what I was drawing down form my business.

The issue I have is that I have a vehicle that I'm currently using that belongs to my company. I'm going to lose this within the next week or so. It's aprox £16k to purchase it from the finance company. I don't have the money but I need a vehicle.

Can I go and purchase a vehicle at around £6-8k before I declare bankruptcy? Something with reasonably low monthly payments. I know that once I file for bankruptcy I'll be able to make the payments quite easily. I basically need a vehicle otherwise I'll not be able to work which would surely be worse for everyone? My credit rating is currently very good.

Thanks in advance.

Yes* & No*


* But nowhere near£6-8k. £2k limit but that is more than enough to get a very decent & reliable car.


* if you are planning to "buy" this car on finance, then you are potentially breaking the law as you know that you are already insolvent

elljay

As above, also you don't know that you will be able to afford it, if you have any money left over after your normal basic living requirements you could be assessed for an IPA, and will have to hand over that excess, leaving none spare. A car for £1 - £1.5 is the max that's allowed usually, though it varies depending on the OR.

I recommend you speak with Stepchange and Business Debtline, both free and hugely helpful, who will go through everything with you. Also why not pop a SOA up here and we can all have a look and see if you are likely to be assessed for an IPA or if there is any other help we can offer.

EJ

emmsie123

No because the max allowed for a car is about 1k. The car would also have to be taken back as your not allowed to pay finance whilst bankrupt.
You could also get a restriction order.

Tofferino

Fair enough. I called Step Change this morning. I need to call them back with some further info.

I doubt an IPA will be on the table as I owe approx £350k and now earn approx £20k a year.

Fair enough if I have to buy a car for £1.5k. Can sort that out. I was told by an insolvency practitioner that they're let you keep a car (of reasonable value) if you needed it to earn a living as earning a living is better than not doing so and being on benefits?

elljay

Tofferino wrote: »

Fair enough. I called Step Change this morning. I need to call them back with some further info.

Excellent, they really are so helpful

Tofferino wrote: »

I doubt an IPA will be on the table as I owe approx £350k and now earn approx £20k a year.

That all depends on what your other outgoings are, if you post your SOA people on here are brilliant at helping to give you an idea of what would be acceptable (or not!). The amount you owe makes no difference. I take home less than that but still pay an IPA.

Tofferino wrote: »

Fair enough if I have to buy a car for £1.5k. Can sort that out. I was told by an insolvency practitioner that they're let you keep a car (of reasonable value) if you needed it to earn a living as earning a living is better than not doing so and being on benefits?

Depends on what you (and the OR) considers as of reasonable value. £1.5k will get you a runabout that's perfectly good for commuting etc. We're all in the same boat, the majority of us also have to get to work - I live seriously in the sticks so also couldn't work without it. Luckily able to keep my car, not everyone does though, for example if there's decent public transport in the area.

Don't forget to post your SOA. There's also quite a good IPA guide and calculator here: https://nedcab.cabmoney.org.uk/ipaipo.asp

Read everything you can, the more informed you are beforehand the better the outcome for you. Good luck.

divorcedclaret

"The car would also have to be taken back as your not allowed to pay finance whilst bankrupt."

That isn't necessarily the case.

I am now discharged but kept a car worth roughly £5k because it was on HP which is technically secured debt. I phoned the credit company who said as I had made all my payments on time I could keep up with the agreement and they wouldn't take the car back. It depends on the individual company.

TheGardener

divorcedclaret wrote: »

It depends on the individual company.

My understanding was that even if a finance company agrees to you carrying on with the payments - the OR would not normally allow you to include the cost of those payments in your SOA when calculating an IPA - so the cost would have to come out of economies on your other household expenditure...

divorcedclaret

My payments were over £200 per month and the OR allowed those as expenses.

Those payments were the difference between me not having an IPA and being given one so I was relieved.

The car was necessary for me or I wouldn't have been able to get to work so maybe the OR took that into account.

elljay

I suppose it just shows how ORs vary. It's really annoying and I'm sure shouldn't be so. I was hugely relieved and surprised when I was allowed to keep my car, it's an unusual import with a sales value over £1.5k. But pretty old. However I think because it's not in Parker's guide, and the valuer they consulted didn't really know, they just let me keep it. I was so grateful but was prepared to forfeit it and buy something cheaper, seems only fair.

The argument about needing it for work applies to pretty well everyone so I don't think it has any real impact on the decision. You can get to work in 1k car just as well as a 5k car. It's daft though as a banger is generally more likely to need repairs (thus eating into any IPA) than a newer car.

No logic!

TheGardener

divorcedclaret wrote: »

My payments were over £200 per month and the OR allowed those as expenses.

I suspect that was an exceptional decision by an OR rather than the norm. Great that you were able to do it but I suspect it may be misleading to others to suggest that it might be the norm.