Bankruptcy and your car
You can often keep a car in bankruptcy if you need it. What matters is why you need it, what it is worth, and whether it is on finance.
Applies to: England & Wales
What to do now
- Find your car’s realistic value from several valuation sites.
- Write down why you need it — work, school runs, caring, health.
- If it is on finance, find the settlement figure — car finance debt.
If you own the car outright
The trustee decides whether belongings can be sold. GOV.UK says you can usually keep a vehicle if other transport is not practical and you need it to:
- do your job;
- meet your household’s basic needs;
- care for someone else, such as a disabled relative.
If it is worth more than a reasonable replacement, the trustee may sell it and either buy a cheaper vehicle or give you money to buy one. Any money left goes towards the bankruptcy costs and debts. There is no fixed value limit in the guidance; the trustee looks at your circumstances.
If the car is on finance or lease
Hire purchase, conditional sale and leasing agreements are different, because the finance company owns the car until it is paid off.
- If the car is worth more than you still owe, the trustee might sell it to release the difference. The trustee cannot replace it with a cheaper alternative in this case.
- If the trustee does not sell it, they tell you and the finance company. The finance company could take the car back, or let you or someone else take over the agreement.
Speak to the finance company early. If you want to keep the car, whether you can carry on paying matters as much as the bankruptcy rules.
A second vehicle, or a car you do not need
A vehicle that is not needed for these purposes, such as a second car, a motorbike kept for leisure or a valuable classic, is likely to be sold.
Before you apply
Do not sell, transfer or give away a car to protect it. Transferring assets for less than their value before bankruptcy can be reversed by the trustee and may lead to restrictions. Be open about the car in your application.
How other options treat a car
- DRO — one vehicle worth up to £4,000 is not counted towards the asset limit. Debt Relief Orders.
- IVA — you usually keep a reasonably priced car; finance on it normally continues outside the arrangement. IVAs and car finance.
- DMP — the car is not involved; hire purchase stays outside the plan.
This page explains how the solution works. It is not a recommendation, and it cannot tell you whether it suits you — a free, regulated debt adviser can look at your full situation.
You never have to pay for debt advice. MoneyHelper (government-backed), StepChange, National Debtline and Citizens Advice all give free, confidential advice with no obligation.
Common questions
Can I keep my car if I go bankrupt?
Usually, if other transport is not practical and you need it for work, your household's basic needs or caring. If it is worth more than a reasonable replacement, it may be swapped for a cheaper one.
What happens to a car on finance in bankruptcy?
If it is worth more than you owe, the trustee might sell it. Otherwise the finance company could take it back or let you or someone else take over the agreement.
Is there a value limit for keeping a car in bankruptcy?
GOV.UK gives no fixed figure. The trustee decides based on your needs and what a reasonable replacement would cost.