Voluntary repossession or forced prior to bankruptcy

Ebonydeluxe

Hi all,

After posting my initial questions on the DFW board (https://forums.moneysavingexpert.com/discussion/5740183)
I have discussed my situation in more detail with StepChange and made some changes to my SOA to reflect what I should actually be spending as oppossed to scrapping by as I have to cover the large debt burden. It is now recommended that I go bankrupt.

I have one question though while I am planning for this bankruptcy. I have two cars on finance. One will have to be repossessed, the other I am going to make the case for keeping due to health, work and family circumstance. For the vehicle that will have to be repossessed, I want the shortfall to be added to the bankruptcy as unsecure debt, so it has to be completed before I make my bankruptcy application.

Should I contact the finance company and voluntarily have the car repossessed or stop paying and have the car forcibly repossessed due to missed payments?

I am in the process of writing to all my creditors and informing them that my financial situation has changed I am currently unable to make my minimum payments and offering a token payment in the meantime (using the StepChange template letter).

I will continue to pay for the vehicle I am hoping to keep. As these are secured debts I am liable to pay for them anyway, even with the bankruptcy. The key here is about having the shortfall in finance added to the bankruptcy.

StopIt

If you hand over the car, any shortfall becomes unsecured debt, and will be included in any subsequent bankruptcy.


The 2nd option should result in the same, but may be a little messier.


How much is the car worth that you're wanting to keep. An OR generally will not let you keep paying a debt in BR, nor keep an asset like a car worth more than £1,000.

Ebonydeluxe

Hiya StopIt,

I have found your support invaulable to date. Thank you!

The car is worth around £6000 at best, the outstanding finance is £8,000+. Does the OR look at worth after finance or just value on the open market.

I will not be able to go to work without the car. I wouldn't even be able to buy a new vehicle with a smaller value. Will I have the opportunity to make the case under health grounds and family circumstances?

I think I don't need to do anything then and just wait for the official reciever to tell me to hand the car back right?

Thanks in advance.

StopIt

Ebonydeluxe wrote: »

Hiya StopIt,

I have found your support invaulable to date. Thank you!

The car is worth around £6000 at best, the outstanding finance is £8,000+. Does the OR look at worth after finance or just value on the open market.

I will not be able to go to work without the car. I wouldn't even be able to buy a new vehicle with a smaller value. Will I have the opportunity to make the case under health grounds and family circumstances?

I think I don't need to do anything then and just wait for the official reciever to tell me to hand the car back right?

Thanks in advance.

They use a certain valuation firm, that I can't put my finger on, but it's usually on the conservative side.


If you had owned the car outright, it would be a fight to keep as they could argue you could sell it and buy a cheaper one, with the difference going to the OR. As it's owned by the finance company technically, it makes it less likely they'll let you keep it, as you normally cannot make any debt payments other than to the OR in BR proceedings.


https://www.stepchange.org/debt-info/bankruptcy-and-my-car.aspx


They MAY allow you to continue making payments, but if the finance ends during the BR, they take ownership of the car. Because it is a high (relatively speaking) debt, they can still say no.

Sparx

I would look at your options to 'voluntary terminate' and hand the vehicle back, typically you are liable for 50% of the total amount payable. Have you got a copy of your agreement? Usually it says under the 'Termination'' section how much you have to pay to meet this point to VT. You can still do it before 50% it's just you will owe the difference which is then unsecured.

As mentioned the debt becomes unsecured. I would speak with Stepchange first and ask if they agree with the logic, as you can then include the remaining unsecured debt in your bankruptcy hopefully.

Ebonydeluxe

I still have four years left on the car I wish to keep. So I would own after the bankruptcy. I would find it very difficult to work if I did not have a car to get to work. The earliest drop off time for my children's childcare is 7:15am and I have to be at work for 8:00am. I am just about making it in on time as it is. And this of course is if everything goes to plan and there are no tantrums, nothing is forgotten, etc.

Even if I was to take public transport, which I did have to when my car was in for repairs, there is not a route that would get me to work for 8am. The earliest would be 8:20-8:30. On one occassion I arrived at work for 9:45 because there were cancelations. Please note I am at risk of redundancy already so rocking up late will not be a positive thing.

The journey and route is not suitable for cycling and I would still face the same time issues. Surely an OR would take this into account. In this instance I would have no choice but to resign from my job and hunt for a new one, which in reality will be difficult while pregnant, but not impossible. And I will also lose out on my current employer making maternity payments.

Ebonydeluxe

Sparx - I looked at my agreement and I will be doing this with one of the vehicles.

I just want to keep one, I have two on HP.

One of things that is bothering me though, is that the agreement for the car I wish to keep says they can terminate the contract if I enter into a DMP with another creditor. So I may not get to keep anyway. But to be honest, how would they know I had entered into a DMP or other debt management plan?

tigerfeet2006

How much are the repayments a month?

Ebonydeluxe

£180 per month

Sparx

Ebonydeluxe wrote: »

Sparx - I looked at my agreement and I will be doing this with one of the vehicles.

I just want to keep one, I have two on HP.

One of things that is bothering me though, is that the agreement for the car I wish to keep says they can terminate the contract if I enter into a DMP with another creditor. So I may not get to keep anyway. But to be honest, how would they know I had entered into a DMP or other debt management plan?

Does your OP not say you are filing for bankruptcy, not to arrange a DMP?

Either way, usually the DMP/Insolvency firm will ask/check for all of your creditors. If you don't tell them they'll see it on your I&E form. Not always but sometimes they write to debtors even if not included in any reduced offer - just so the debtor is aware the client is going into a DMP, IVA or Bankruptcy.

The clause that allows the HP to terminate the agreement, I would presume is not heavily enforced if you are able to keep the vehicle and repayments up with them. It's likely there just to cover them that should you enter a DMP/IVA etc they have legal rights still to exercise and repossess if necessary.

It will be down to your IP if you're able to keep one of the vehicles. If it helps and speaking from experience, as long as the monthly repayments are not extortionate (£180 isn't too bad) the IPs I often hear from allow the vehicle to be kept. But higher value vehicles/repayments are sometimes deemed not fit for purpose whilst going bankrupt, so advise you VT or allow repossession.

Ebonydeluxe

I thought my comment might seem confusing. Yes I am going to apply for bankruptcy, not DMP. What I meant to explain fully was that I can’t find any mention in the HP agreement specific to insolvency/bankruptcy, but took their clause regarding “DMP and other debt management” to include bankruptcy. In other words, I am assuming that if I go bankrupt they will treat this as entering a debt solution/management and seek to terminate the contract.