Tuesday, 7 February 2017

Bankrupt? What Happens to the Car

When it comes to bankruptcy, some consequences are nice and others are not so nice (see Breaking Law at chapter 35 - and if you haven't bought the book yet, doing so will not bankrupt you). 

One of the nice - and merciful - consequences is that you get to keep property which is necessary for you to use in your work or business. And that may well include a vehicle although if the vehicle is valuable your trustee in bankruptcy (the official receiver or whoever) may require you to replace it with a cheaper alternative.

But say the vehicle is on HP? The Court of Appeal ruled on what was to happen in that situation in a case last Friday*. The HP agreement will almost certainly provide that if you are made bankrupt then the finance company can terminate it and repossess the vehicle and if the agreement said anything else or it did not repossess then I would eat another of my wigs! However, the agreement could well have  a benefit to someone other than the finance company because the value of the vehicle might well exceed what the finance company is owed? Who would be entitled to that excess if the vehicle was a tool of your trade? According to the Court of Appeal, not you but your trustee in bankruptcy, for the benefit of your creditors. 

* The case is called Mikki v Duncan [2016] EWCA Civ 1312