Will I Lose My Car in Bankruptcy?
The Bankruptcy process does not stop or prohibit you from owning a car. However, there are some restrictions and exceptions for your protection when it comes to your vehicle, and there are essential considerations for us to consider when we explore all possible avenues with our clients so you can keep your car.
There are three points you need to satisfy to keep your vehicle:
- The vehicle’s value is below a set amount; there is currently $9,100 of equity in the car as of October 2023. This amount is reviewed regularly by AFSA and changes from time to time.
- The vehicle is your primary means of transport.
- You maintain repayments on your vehicle (if it is under finance).
What If Keeping 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 own a car as the insolvent party. Your appointed trustee will weigh all the considerations before an asset is attached and consider if the vehicle in question allows you to produce an economic income, for example, by going to and from work.
If the trustee discovers that you have public transport within easy reach of your home and place of work, 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. The aim is, first and foremost, to service all the debt the insolvent party owes and protect them from economic ruin or further unnecessary hardship.
What If You Owe Money on the Car?
Suppose you have vehicle financing on your car. In that case, the appointed trustee will carefully evaluate the vehicle’s remaining value to see if sufficient equity is left to help pay all creditors.
Sometimes, 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 vehicle and make a more satisfactory repayment arrangement.
This can include a payment holiday or new terms that you can afford. Our team will always look for a “win-win” situation. For example, if you had a car valued at $30,000 and a loan against the vehicle for $23,000, then you would have $7,000 worth of equity. You can keep the vehicle if you can still repay the loan.
Consider Getting Another Mode of Transport?
Suppose you can use alternative means of transport without sacrificing your ability to make a living. In that case, the trustee will consider all the options available to you, such as public transportation.
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 purchase a cheaper vehicle, which could result in lower repayment instalments and insurance premiums.
This will generally apply to cases where an expensive car’s monthly repayments and other costs are too high.
This will lower your exposure level and allow you to own a means of transport that will enable you to continue earning an income or start a new business while commuting more affordably.
Will I Lose My Car in Bankruptcy if I Own More Than One Car?
One of the most straightforward solutions a trustee will always look for is to identify luxury or excess assets that can be sold 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 threaten your ability to earn an income, then they will be deemed appropriate to sell.
This method allows you 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.
Will I lose my Car in Bankruptcy?
“Will I Lose My Car in Bankruptcy?” is a common question we always ask. We empathise with the situation and understand how much you may depend on your car. We’ll work to find the best solution for you regarding all your mobile assets so that you can continue to work and provide for your family.”
Andrew Bell Bankruptcy Advisor
With over 30 years of experience in debt solutions and bankruptcy in Australia Andrew can find a solution for you.
“Nothing is more satisfying to me than knowing that I’ve helped someone get back on their feet by guiding them through the Bankruptcy Process. Rest assured, you’re in good hands with me as we solve your financial problems together.”