www.iva.co.uk

I have a friend who is thinking about bankruptcy. She has no assets etc. She has a car which is on HP with 3 years payments left. She needs her car for her job.

If she went Bankrupt would she lose the car, or as it is not technically owned by her would she be able to keep it and carry on the payments?

Hi, not 100% sure but I think she may well lose it.

If the car payments are not excessive (less than £200 per month?) and the car is not deluxe, there is unlikely to be enough equity for the Trustee to bother including this.

I don't know whether you would be allowed to keep the car on finance, but even if the OR agreed to it there may well be a clause in the HP agreement meaning that the HP company will repossess the car in the event of BR.

It's not a deluxe car or anything, but it doesn't sound too hopeful on being able to keep it

I spoke to the Insolvency Service on this issue only yesterday and they said that you should not lose the car provided the equity value is less than £1,000. I suppose it will depend on how much is owed towards the car vs how much it is worth. Also if the official receiver who deals with the bankruptcy thinks that you could get a cheaper vehicle then they may insist on a downgrade.

The problem is that the Official receivers are not always consistent and therefore it is not possible to give a definite answer.

Having said the above the HP companies do tend to repossess the car in the event of bankruptcy as Skippy has said.

Hi PJA

The first thing your friend should do is speak to the HP company and find out whether they would have an issue if she went bankrupt. Most HP companies will not be bothered as long as the payments are maintained but it is well worth checking.

If all is OK on that front then whether or not she is allowed to keep the car will be up to the OR. If she needs the car and the payments are reasonable in the context of her circumstances and the net worth of the car is less than £2000 (ie market value less outstanding HP) then she will be OK.

Most HP companies are happy to let HP agreements run post-bankruptcy so long as the HP payments are maintained. The OR will have to agree with this, but so long as the repayments are not excessive all should be well.

Many thanks for all the replies. You have all been very helpful