Can you sell your car before you go bankrupt
- 09 Nov 2024
You can sell your car before you go bankrupt. If it is worth more than £2000 this can provide a number of benefits.
Included in this article:
- Are you allowed to sell your car before going bankrupt?
- How much can you sell it for?
- Can you sell to your partner or friend?
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Are you allowed to sell your car before going bankrupt?
If your car is worth more than £2000, the Official Receiver will force you to sell it once you are bankrupt (this value increased from £1000 in October 2021). They will then keep any proceeds over £1250.
One way to avoid this is to sell before you submit your application.
There is nothing to stop you doing this and it gives you a huge benefit. You are then in control of the funds you raise and can choose what to do with them.
You can spend up to £2000 buying a replacement vehicle. In addition you can pay for a full service and 12 months insurance.
Any extra money can be used to pay for your bankruptcy application fee. You can also catch up on rent or utility bill arrears or even use some of the money to cover living expenses.
Do not sell your car and pay off debt owed to friends or family. This would be a preferential payment and the official receiver may demand the money is paid back.
How much can you sell your car for?
If you decide to sell your car before going bankrupt, it is vital you get a fair market price.
You can’t sell to someone for less than it is worth and then carry on using it. You will need to give details of any vehicle you sell within 12 months of the date you go bankrupt and the money received.
If the official receiver believes you sold for less than what it was really worth, they can demand the car is returned. They can enforce this with legal action if necessary.
You can establish the fair market value of your car by getting an online valuation from We Buy Any Car or the like. Keep a record to refer back to later if required.
Can you sell to your partner or friend?
There is nothing to stop you selling your car to anyone you like before you go bankrupt.
You just need to follow the golden rule. You must be able to show you got market value.
Where you sell to your partner or a family member, you must ensure you can prove that they actually gave you the money. If they pay you cash, deposit this into your bank as a record before spending any of it.
A significant benefit of selling to a family member is they could then let you continue to use the car. In affect you are then borrowing it from them
It is no longer yours and so is not at risk if you go bankrupt. But you can still register it in your name and pay for the running costs.
We are experienced in helping car owners go bankrupt. Give us a call (0800 044 3194) or complete the form below to get in touch.
Im looking into going bankrupt and ive got a van thats valued at £3000,but I was planning on selling it to fund the bankruptcy and get a cheaper car as I need this for my disability
Hi Karlc
There is no problem with selling your van before you go bankrupt. You can then use the proceeds of the sale to buy an alternative vehicle. You can spend up to £2000 although I normally recommend no more than £1500 to be safe.
Any money you have left over can then be used to service and insure the car and pay for the cost of going bankrupt.
If you would like to discuss your options and get more help with the bankruptcy process, please give me a call. The advice is free and confidential (0800 044 3194).