When you claim bankruptcy, certain personal assets are protected while others are put into your bankruptcy estate. Protected assets can include your standard household items including furniture, whatever tools you might use for a trade and vehicles that are used primarily for transport up to a certain monetary value, compensation payouts and superannuation payouts.
Unprotected assets can include cars worth more than the protected limit, real estate, artwork, copyrights, shares and term deposits – just to name a few. Therefore, the asset will vest in the trustee, meaning that the asset comes under their ownership and can potentially be sold to repay your debts.
The trustee’s role is to understand the value of your interest in these vesting assets. Contrary to standard belief, it can be possible for this to happen without selling the asset to a complete stranger. As opposed to placing your property on the open market and selling to the highest bidder, a trustee can look to sell your interest in an unprotected asset to a third party who is not bankrupt. This could include a co-owner.
Going Bankrupt and Keeping My Car
People are often greatly concerned about their cars when it comes to declaring bankruptcy. The team at Understanding Bankruptcy often finds that this concern is truly unwarranted and the declarant doesn’t have to worry. Typically, you will not automatically lose your as a result of declaring bankruptcy. This is because every bankrupt person is able to owe vehicle assets worth up to a particular value. This is usually around $8,000.
For vehicles under finance, this applies to the equity on your current vehicle. However, while cars are personal assets, they’re not like homes or other property in the way that they don’t hold or increase in value as time goes on. Usually, they actually depreciate in value the longer you own them and the more use you get out of them.
Car loans are typically secured to the vehicle you’re buying. The car loan provider will often have a chattel mortgage, charge or a lease over the car which is registered on the Personal Property Securities Register (PPSR). This register alerts other people to the fact you are still repaying what you owe on the car and, as a result, it isn’t really your vehicle to be selling.
Once you take out a loan to purchase a vehicle, the car will immediately depreciate when you drive it from the dealer’s location. In fact, the amount that you owe on your vehicle loan will more than likely be higher than the value of the vehicle itself.
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