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Buying a new car while you are bankrupt

Buying a new car while you are bankrupt

You are allowed to buy a new car while you are bankrupt. But there are number of things you need to consider. Not least, what options do you have to pay for it. Also, are you allowed to sell your old vehicle?

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Are you allowed to buy a new car while you are bankrupt?

There is nothing to stop you buying a new car while you are bankrupt. You are allowed to do so if necessary.

Perhaps your old car is beyond repair. Alternatively you may not have had a car when you went bankrupt but you now need one because your circumstances have changed. However, the main issue is how to pay for the new vehicle.

You are allowed to save money from your agreed living expenses budget. However this will take time.

Using some extra money you earn perhaps by doing overtime is a possibility. But you need to be careful. If you start earning overtime on a regular basis, you are required to tell the official receiver about this. They may then ask for a review of your income and expenses budget and demand you pay any extra surplus income you now have to them.

Another option is to get help with paying for the new car from friends or family. But they can’t simply buy a car and gift it to you. It would then become an asset acquired during your bankruptcy and the Official Receiver could claim it.

If someone wants to buy you a car (or give you one), it is better that you agree that they retain the ownership and you just borrow it until your bankruptcy is over.

You can borrow a car of any value from someone you know. The vehicle can be registered to you and you can insure it. However, as long as you do not ow it, there is no risk that it could be taken from you by the OR.

Can you sell your old vehicle while you are bankrupt?

If you already own a car, you are allowed to sell it while you are bankrupt as long as the Official Receiver has allowed you to keep it.

You will know this is the case because you should have received confirmation from them that they have disclaimed any interest in it. This will normally have happened if your old car was worth less than £2000. Alternatively it might have been exempt because it was a tool of your trade.

Given you were allowed to keep it, any money you now raise from selling the vehicle is yours to do with as you wish. This means you can put it towards buying your new car. You can sell for cash or use it as part exchange.

You should not sell your car after you go bankrupt until you have confirmation of the Official Receiver that it is exempt and they do not have any financial interest in it.

Is it possible to get a new car on finance?

Getting finance to buy a new car while you are bankrupt is difficult. Your poor credit rating (and the fact you are bankrupt) will mean the only option is to consider a specialist sub prime lender.

There are a number of these including Zopa, Blue Motor, Cazoo and Moneybarn. This is not an exhaustive list so you should search for ‘car finance during bankruptcy’ and speak to some lenders to see if any will help. If they can, you will need to be able to put a deposit down. Using your old vehicle for part exchange will help with this.

If you are unable to find a finance company who will work with you, someone with a better credit score (perhaps your spouse or partner) could take the finance in their name. They would officially be the owner of the vehicle. As such they may also have to insure it in their name. But you could then be a named driver.

Alternatively, you will have to wait to get finance until after you are discharged. However, even then you will need to use a specialist lender. Main stream vehicle finance companies are unlikely to want to help you until your credit file is clear.

Want further advice about your car and bankruptcy? Give us a call (0800 044 3194) or complete the form below. The advice is free and without obligation.

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ABOUT THE AUTHOR
James Falla
I have been advising people on how to solve their debt problems for over 20 years. During this time I have helped many people go bankrupt. I am an FCA Approved Person and the Managing Director of Wilmott Turner Financial Services (owner and operator of Bankruptcy Expert
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