Car situation in bankruptcy

Aivi

Hello,
Im currently looking into bankruptcy. Debts are around £20,500 and no missed payments but a change in my husbands job means he can’t afford to keep us going anymore.
I am the registered keeper of a car worth around £6000. The car isn’t financed through me and I pay my Mum £200 per month. This has been an ongoing arrangement for many years now- with each car that’s renewed.
I obviously can’t afford the car now and will hand the car back to my Mum and she will continue to pay the finance on it - the loan is hers.
I’m worried the OR will think I’m trying to deceive/hide assets but I wouldn’t class myself as the owner - Mum paid for the car and I leased it as such.
Could anyone offer any advice around this? I’ve spoken with insolvency service and they couldn’t offer much help. I really don’t want to end up losing the car and my mam having to continue payments for something she hasn’t got anymore.
Thanks in advance.

System

Do you have anything in writing which confirms the arrangement? Unless there's a financial agreement securing the finance on the vehicle you are the owner of it, the same as you would be if you took out an unsecured loan from a bank to buy the car and would have a hard time proving otherwise.

If your husband is going bankrupt and you aren't then it doesn't matter at all, the OR cannot have any interest in your car.

ToxtethO'Grady

You mention finance in your mum's name, is this a Hire purchase/PCP agreement or fixed sum loan agreement?


The former mean you or your mother never own the car until the last payment is made and the OR would probably order you to stop any payments to your mum as the agreement is in her name not yours.


If its a loan agreement your mum owns the car, you are the registered keeper and the OR would tell you again to stop payments and could class the car as belonging to you as you have made the payments not your mum.


You would have a beneficial interest in the car and in either case you would find it hard to get the OR to agree that you can keep the car and keep paying towards it.


Unless you can prove it is essential - adapted for a disability or is a motability car

Aivi

Thanks for the replies.
It’s me that is going to apply for bankruptcy.
Mum has an unsecured loan and the car was bought from that. I am stopping the payments on the car and obviously won’t expect to be able to keep it. My husband may take over the payments so i still have access to it - would that still be acceptable?
My real worry is that the OR will force a sale of the car and use it to pay my debt when technically I don’t own the car - I pay my mum monthly for it.

Aivi

I should add that the whole loan wasn’t used to buy the car - would that make a difference when they were looking into the ownership?

Aivi

I’m sorry to sound stupid but what would a beneficiary interest mean?

ToxtethO'Grady

Beneficial interest is when you've paid in to something but not legally named on it - most often used in divorce proceedings around property, by providing childcare a partner has contributed to the house so is owed something from that.


By paying the payments to your mum she owns the car but may not have been able to keep it without your payments, the OR may say you own £2000 of the car and your mum or husband can 'buy' that from you - you then pay that in to the BR.


The OR can reverse transactions such as payments to the loan going back 5 years, it wouldn't matter that the loan was not covering the car, you've paid your mum to the detriment to other creditors.


But the OR makes their decision on the information you give them you just need to be aware of how they look at some things.

Aivi

Thanks for the advice. I just can’t stop for worrying for my Mum.
I’ll contact step change in the morning and will speak with them about the situation and take it from there.

TimeToRebuild

Its a hard and worrying time, however you need to try and remove emotion..... very hard to do!

The OR will see things legally, they need to recoup any monies/ assets you own.

As you have paid towards the car they would need to determine what % of the car you own "legally" as it is an unsecured loan then its likely the OR will take an interest.

You will be best speaking to your mum first to let her know what potentially is going to happen, it wont be pretty but its what needs to be done.

Good luck with it all!

System

Just to add, whatever you owe to your mother you cannot legally pay her once you've declared bankrupt, the debt forms part of the bankruptcy. To repay her would be seen as preferential treatment of a creditor. I'm not going to pretend that people don't repay friends/relatives when they've banked but beware of it being something the OR could flag up if you're making regular payments.

fatbelly

The arrangement appears to be a 'lease' rather than repayment of debt but I agree with Toxteth that the informality of the agreement may cause an issue and it does appear that the intention of the parties was that the ownership of the car would eventually go to the OP.

You say you obviously can’t afford the car now so how much surplus income will you have and what will you do for transport? Those two questions are linked.

Considering you will need £680 for the bankruptcy fee and your debts are £20500 you could potentially pay £590 pro-rata to your creditors, getting debts under 20k, and look at a DRO with a £90 fee. If you meet the other criteria.