If you go bankrupt some assets which you own may get sold. And this may include your car, depending on certain factors.
When can you keep your car in bankruptcy?
You can keep your car if you go bankrupt, if:
- It is valued under a set amount threshold (which is indexed for inflation);
- The car is your primary means of transport; and
- If the car is financed, you maintain finance repayments.
The set amount threshold value of a car you can keep at the time of writing this article is $8,550, however, it will increase over time.
When calculating the set amount threshold any finance for the vehicle is taken into account. So, for example if you have a car worth $30,000 and it has $20,000 finance on it then its net value is $10,000.
What happens if your car is valued over the set amount
If your car is valued over the set amount threshold then:
- Your trustee can sell it on the open market and upon sale will pay you the set amount threshold (currently $8,550); or
- A related party can offer to buy the equity in your car over and above the set amount threshold.
What happens if your car is financed
If your car is financed and you keep making payments, generally a financier will let you keep it. However, should via you making payments, the equity in your car increase so that it is above the set amount threshold (currently $8,550), then your bankruptcy Trustee may be able to claim the equity over this amount.