Will I Lose My Car in Bankruptcy?
All Movable Assets Are Considered During A Bankruptcy Process
During any Bankruptcy process, the appointed trustee is mandated by the law to consider all assets and sources of equity to pay creditors the money owed to them. This could include the sale of your car, which by definition is a movable asset.
The Bankruptcy process does however not stop or prohibit you from owning a car. There are some restrictions and exceptions for your protection when it comes to your vehicle and there are important considerations for us to take into account when we explore all possible avenues with our clients.
What If Your Car Ensures You Can Continue to Earn A Living?
The law ensures that all parties are treated fairly, which could apply to Bankruptcy and you owning a car as the insolvent party. The appointed Trustee will therefore weigh up all the considerations before an asset is attached.
The trustee will also consider if the car in question allows you to produce an economic income like going to and from work. If the Trustee discovers that you have public transport in easy reach between your home and place of work, then you might be required to give it up as there is no threat to your livelihood.
The Bankruptcy law was designed to protect all parties as best it can. This includes protecting society’s ability to recover from any economic downfall and to ensure that it can produce new growth in the future.
This same principle applies to all parties in a Bankruptcy process. The aim is first and foremost to service all the debt owed by the insolvent party, but to also protect them from permanent economic ruin.
What If You Owe on The Car?
If you have vehicle financing on your car, the appointed Trustee will carefully evaluate the remaining value on the car to see if there is sufficient equity left to help pay all creditors. The above circumstances mentioned earlier are also considered when it comes to your ability to earn an income.
In some instances, a Trustee can approach the credit provider with whom you financed the car to see if a better debt agreement can be negotiated to help you keep your car and receive a more satisfactory repayment arrangement. This can include a payment holiday or new terms that you can afford.
This is a “win win” situation because you get to keep your car and the credit provider limits their risk exposure and or potential loss if the Bankruptcy process was unable to raise enough equity.
Consider Getting Another Mode of Transport?
If you are able to use alternative means of transport without sacrificing your ability to make a living, then the Trustee will consider all the options available to you. One of them being public transport.
In other cases, the Trustee might find that it would be better to sell the car, pay off the remaining credit and ask you to procure a cheaper vehicle that could result in lower repayment installments and or insurance premiums. This will normally apply to insolvent cases where an expensive car’s monthly repayments and other costs are too high.
This will lower your exposure level and still allow you to own a means of transport that will enable you to continue earning an income and or start a new business.
Some examples we have seen also include people selling their cars and getting motorbikes or scooters as a way of commuting more affordably. All options must be explored and considered by all parties.
Do You Own More Than One Car?
One of the easiest solutions a Trustee will always look for will be to identify luxury or excess assets that can be sold first before attention needs to be paid to primary or crucial assets.
If you own multiple movable assets like cars, motorbikes, boats or caravans then the Trustee will want to attach those items first. If any of those secondary assets do not pose a threat to your ability to earn an income, then they will be deemed appropriate to sell.
This method affords you the opportunity to resolve your Bankruptcy process sooner as the required capital needed to service all your debt is achieved quicker and with minimal impact on you and your loved ones.
As a Trustee in Bankruptcy, Ross Thomson is often required to think outside the box. As well as creative thinking, Ross brings compassion to the table.
For Ross, it’s important to see the people behind the financial problem –not just numbers.
Ross recently helped a bankrupt client who lives in a retirement village with her seriously ill husband.
The unit she & her husband live in is not owned by them, but subject to a 20-year lease.
The money to be repaid by the management was due only at sale, when the client finally left the retirement village.
Sale of the unit was likely to take several years &, if he did sell the couple’s unit, Ross realised he would be effectively evicting them from their home, without resources or family to help them.
Ross decided to contact the retirement village management & put a proposal to them that they prepay some of the moneys they would otherwise pay the client.
The village management considered the proposal & have agreed to prepay some of the moneys otherwise due.
The client is relieved that she will not be evicted & can now concentrate on helping her husband through his health issues.
The moneys paid represented about 75% of what would have been available to creditors if they waited two years.
It is a win for the client and for the creditors.
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