Going bankrupt means losing control of your belongings, as the trustee has the legal right to sell them to pay off your debts. If you do not want to sell your belongings, then you might want to consider alternatives to bankruptcy. This article answers the question: How will my belongings be affected in bankruptcy?
You may also want to read our article on prenuptial agreements in bankruptcy.
What happens to my belongings?
During bankruptcy all your belongings or assets will become the property of the Official Receiver (OR) or trustee (apart from those that are exempt). Once ownership is passed to the OR or trustee, you are not allowed to sell or give away your belongings. If you recently received an item during bankruptcy this will also belong to the OR or trustee.
Can I stop my belongings from being sold?
You will lose all control of most of your assets, this means there is very little you can do to stop your belongings being sold. However, there are some belongings which will be exempt meaning you can keep them unless they can be replaced with cheaper alternatives. The following belongings are exempt:
- Tools, materials, equipment required for your job
- Household equipment (Cooker, Fridge etc.)
- Necessary items for basic family needs
If you feel the OR or trustee is selling an item necessary for living, you can challenge the decision by applying to court. You should try asking before applying for court. Similarly if you disagree with the valuation that an item is being sold at, you can get an independent valuation and show this to the trustee.
Can they take my child’s belongings?
Bankruptcy won’t affect anyone else’s possessions unless the Trustee can prove you have given your own things away to keep them from your creditors. The Trustee is not permitted to take items belonging to a child, but the onus is on you to show that the item is not yours. The easiest way to do this is to keep the items in question in the child’s bedroom.
Can I keep my car when going bankrupt?
If you have been discharged from bankruptcy then the trustee/official receiver will have no interest in your car. However if you are still considered an un-discharged bankrupt then it is highly likely that the trustee will have an interest in your car given its current value, provided that it was not purchased on Hire Purchase. If your car is of high value, It is likely the OR would sell your car and make an allowance for you to buy a modest replacement.
There are two circumstances which would allow the OR to exclude your car from your bankruptcy estate. These are:
- Vehicles and other items of equipment as are necessary to the bankrupt for use personally by them in their employment, business or vocation;
- Household equipment and provisions as are necessary for satisfying the basic domestic needs of the bankrupt and his family.
If you don’t personally use the car to go to work, the only way you would be able to justify keeping the car is if you need it to satisfy a basic domestic need. This is at the discretion of the OR.
For more information on whether you can keep your car in bankruptcy, please read our article on bankruptcy and car ownership.
What will happen If I hide or give away my belongings?
It is a criminal offence to hide your belongings from the OR or trustee. If you do this you could be fined or taken to prison.
How far back does official receiver go when looking at your assets?
The OR will want details of any transactions undertaken in the 5 years preceding bankruptcy where you have sold or given away assets, such as cars. This will be to see whether an asset has been sold at ‘undervalue’. If this has occurred the OR will undo the transaction and the asset will form part of your estate. Cars of less than £1,000 in value are not usually considered an asset and can be kept by the bankrupt person.
It is perfectly acceptable for someone else to buy your car at its true value and for you to continue to use it. However, if you were to use your own money or any money you are about to receive to buy a new car, the OR will seize and sell it in order to satisfy some of your creditors.
What if I jointly own some of my belongings?
Jointly owned belongings can still be sold. If you own jointly owned belongings, the trustee may:
- Ask the other owner to agree on a value for your share of the items.
- Give the other owner a chance to buy your share of the goods.
- If the other owner does not agree, the trustee may apply for a court order to sell the items.
You may also find our article on how bankruptcy affects your spouse useful to read.