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Bankruptcy and hire purchase of a car

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Paulst30 | 09:47 Thu 03rd May 2007 | Law
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My brother asked me this the other day and i wasn't sure but cant seem to find a real solid answer or any experience of it.

If you are made bankrupt and you have just taken out a hire purchase agreement for a car, can you have the car taken back by the creditor?

He uses the car for work andif it gets taken away he will loose his job, will this be effected?
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Surely if you are made bankrupt you can't obtain any form of credit???
Actually, bankrupts can obtain credit under certain circumstances.

With regard to the car, it very much depends on what type of car he has and whether or not there is any equity in the vehicle.

The finance company will have in its terms & conditions that the agreement will be voided if the customer goes into bankruptcy. They may elect to let your brother keep the vehicle if he is in negative equity though.

If he has plenty of equity in the car (ie he paid a large deposit), the IP may force the sale of the car so that the surplus money can go to the creditors.
Question Author
He took the HP out i think about 4 months ago. So i'm guessing there will be no equity on the car as he never put a deposit down on it. Just straight up finance.

He's probably just paying the interest at the moment.

Thanks so far guys, i can see the green look draining a little from his face
Does this help restore your brother's facial colour?

Quote:
" Personal possessions of a reasonable nature are excluded from bankruptcy; these include your household possessions and tools of the trade which usually includes your car if you can demonstrate that you need the car to get to work. The Trustee is entitled to ask you to downgrade an item if they feel it is extravagant and introduce funds raised into your bankruptcy. For example if you have a car on hire purchase, which is judged to be too expensive and consequently affects the amount your creditors would receive, then you will be asked to trade it in for a cheaper vehicle."

Source:
http://www.thedebtadvisor.co.uk/html/bankruptc y/bankruptcy_faqs.asp?cID=909&uID=

Chris

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