So you’re having a really hard time right now with financial challenges and are considering bankruptcy, but can you still keep your car?
We have some good news for you and some bad news too.
The bad news is that bankruptcy can affect the rest of your life. It’s not something that we recommend unless it’s a total last resort.
Additionally, the ownership of your car might be lost. But the good news is that generally, it won’t be, otherwise just how will you get to and from work?
We’re going to talk about the potential impacts.
Bankruptcy and keeping your car
Are you sure you want to do this? We’re not so sure even though it’s a bleak outlook. Bankruptcy affects thousands of lives in Australia each and every year.
Can you keep your car if you go bankrupt? Maybe. There are ways to get around them taking your wheels away. We share several ideas and concepts.
You must meet certain criteria. This includes:
- How much your vehicle is worth. Generally, you can own a vehicle up to $7,900 in dealer-acquired value. The retail price on this is around $10,000 but can vary state-to-state.
- If you can take other means of transport. They won’t let you keep your car if you can catch the train or bus to and from work, or even jump on a bicycle. They assess your actual need to have a vehicle, as opposed to luxury desires. In other words, people in country areas are more likely to keep their car when under bankruptcy so they can get to and from work.
- The debt you owe on the car. If you have a car loan, then you’ll be allowed to keep the car under a bankruptcy declaration but you must continue making those monthly repayments.
Now let’s look at some common questions we keep getting.
Can you buy a car once bankrupt?
Yes – you can buy a car after you’ve declared bankruptcy. The issue is that you’re generally only allowed a cheap vehicle to get around, and only if there are no viable or alternative means to get to and from work. You will need to tell them the value of the vehicle and why you’re buying it, but more importantly, how you got ahold of the cash for it.
Will they take my car away?
They will take your car away to repay existing debt collectors if there is value for them. For example, a newer luxury Mercedes with nothing owing on it might be repossessed but that 20-year-old Commodore in the driveway with broken fuel caps probably isn’t something they will chase after unless you spent a considerable amount towards modifications and upgrades.
Is it like the US where they tow my car away when I’m not looking?
Yes, it can be like that, but there is a process that these debt collectors need to go through. To be honest, it doesn’t happen that much in Australia, especially for cheap cars. They will want to know that they can make a profit off the sale of the car before they send a tow truck to your house to legally steal your car away and sell it.
So I can still go to work?
Yes – it’s expected that you will continue work and get on with your life. You can keep a car which has a car loan if they know that you are still going to make those repayments and this is a primary reason why you’re going to work. They aren’t heartless and will listen to your situation, but you can’t really own a luxury car.
Can I get my car back from them?
Well, that depends. They’ve taken it away to sell it and recover some money that you weren’t paying. So unless you can come up with the full amount for the car within a few days, it’s probably unlikely. That said – if you left removable things in there like baby seats, then yes, they have to give that stuff back to you without damage. The same goes for common electronics like plug-in dashcams.
In summary: keeping assets during bankruptcy
We see bankruptcy as a total last resort. It’s certainly not something we encourage here at The Debt-Free Community. We just see better options for you, especially if you need a vehicle to get you to and from work or to see your kids.
People often take this as an easy way out. It’s not. If you want to keep your car, then a debt consolidation loan might be a viable option for you.
We might be able to help you so reach out to us now.
Likewise, we praise the free information on the MoneySmart website. ASIC talks about repossessed goods and how you can avoid having your car taken away by tow trucks. Check it out!