What value of car are you allowed if you go bankrupt
- 20 Feb 2022
As a general rule, you can keep a car with a value of up to £2000 if you go bankrupt, given you need it. In some circumstances it may be possible to keep an even more expensive vehicle.
Included in this article:
- The car value allowance if you go bankrupt
- What if your vehicle is worth more?
- Can you keep a more expensive car if it is on finance?
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The car value allowance if you go bankrupt
If the value of your car is £2000 or less, there is a good chance you will be allowed to keep it after you go bankrupt. This allowance increased from £1000 in October 2021.
That said, you still need to have a good reason for having a car. This might be to get to and from work where there is no reasonable alternative public transport. Alternatively you may act as a carer for a family member.
If you don’t have a good reason for having a car, you may not be able to keep it even where it is worth less than £2000. Examples of this are where it is clear you don’t need it or alternative public transport is available. Just using a car to take your children to school may not be a good enough reason to be allowed to keep it.
The Official Receiver will check the value of your vehicle using an online service such as we buy any car.com. If you disagree with their valuation, you can submit your own for their review. Where agreement can’t be reached, they will appoint a valuer to physically inspect it.
In a situation where the Official Receiver believes you do not need your car, you can pay them the equivalent of its value to keep it or sell it. This is even if it is worth less than £2000.
What if your vehicle is worth more than £2000?
If the value of your car is greater than £2000, the Official Receiver (OR) will normally tell you it will have to be sold. If you still need a vehicle, you will be returned £1250 to buy an alternative. Any remaining funds will be kept by the OR.
That said, if you are facing this situation, there are still some some options available which will allow you to keep the car.
Firstly, a third party can pay the difference between the value of the car and £1250. This could be a family member or friend. That way, the OR realises the value, but you can keep vehicle and continue using it.
Alternatively, you can consider selling the vehicle yourself before going Bankrupt. You can use the proceeds to first buy a cheaper alternative, being careful not to spend more than £2000. Excess to funds can be used for things like servicing the vehicle and the cost of going bankrupt. Anything left over has to be handed to the OR.
You may be able to keep a vehicle that is worth more than £2000 if you are self employed and use it to carry out your work.
Can you keep a more expensive car if it is on finance?
If your car is on finance, it may be possible for you to keep it even where the second hand value is greater than £2000. This is because its true value is the amount after deducting the outstanding finance.
So if your vehicle is worth £8000 but the outstanding finance is £7500, the true value is actually only £500.
Given the true value is £2000 or less, the OR will have no interest in the vehicle. As far as they are concerned, you can keep paying for it as long as the monthly payments are not excessive.
That said, you will still need to confirm with your finance company that they will be happy to maintain the agreement if you go bankrupt. Many will be fine as long as you keep up with the agreed payments. However some may require the vehicle to be returned. You need to know this in advance so you can make arrangements to get an alternative vehicle if necessary.
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I am applying for bankruptcy this week. I have a car on finance which is worth £7000 so I know that has to be handed back to my financers/sold by the OR. My Dad bought a car, in his name, specifically for me to use. Can the OR do anyhting about this?
Hi Danielle
You do not have to worry about the car that your dad has bought you. You can list this as a vehicle that you drive but do not own. Given your Dad can prove he bought the car with his funds (if asked) there will be absolutely no problem and the car will not be at risk.
Hi. i am bankrupt its 2 years now which bank will open my a bank account please.
Hi Colinc
As I am sure you know, bankruptcy lasts for 12 months. As such if it is 2 years since you went bankrupt, you should now be discharged and no longer officially a bankrupt person. In terms of opening a new bank account, even though you should now be discharged, the record of the bankruptcy will still be on your credit file. As such you are not likely to be able to open a current account. However most main stream banks offer basic accounts. You should be able to open one of these no problem.