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Life During Bankruptcy - Your Car


Below is what you need to know regarding your transport during bankruptcy and we also give you our tips:

  • Cars and motorbikes are protected up to a threshold value of $8,150 to ensure you have transport during bankruptcy.
  • The threshold value is based on the auction value of the vehicle and not the amount a similar vehicle is advertised for sale by a motor dealer. To assess the auction value of your vehicle we recommend The dealer wholesale value provides a good estimate of the auction value of your vehicle.
  • The threshold value applies during the three years of bankruptcy and is updated twice a year for the CPI.
  • You can change cars during bankruptcy but the value of your car during bankruptcy should always be at or below the threshold value allowed for your car.
  • You can have multiple cars and motorbikes whose combined auction value adds up to the threshold value.
  • Husband & wife can have one car and combine their threshold values to have a car of greater value.
  • You can keep a vehicle subject to a lease or hire purchase, provided the value of the vehicle does not exceed the loan payout amount by more than $8,150
    (the threshold value). You will be required to continue paying the monthly payments. It is very rare for a lender to not want you to keep the vehicle and continue making the monthly payments. As to whether you keep the vehicle or hand it back is your choice.
  • If you hand back to the lender a financed vehicle before or when you become bankrupt, any shortfall incurred by the lender will be caught by your bankruptcy.
  • If you intend to continue using your financed car during bankruptcy, check to see if it has a balloon payment at the end of the contract term. This can be relevant if you are wanting to continue using the car once the period of finance payments finishes. Your bankruptcy may negatively impact the financier being prepared to finance a payment arrangement for the balloon payment. We are not saying this will happen, but it could happen. We have seen people receive support from family for them to retain the use of their vehicle. This involves a family member saving and/or borrowing and paying the balloon payment for you to continue having the use of the car.
  • You can spend money on maintaining and improving your car provided its value does not go above the threshold value.
  • If you have a vehicle with an auction value above the threshold value, your family can pay the difference to your bankrupt estate (auction value of vehicle less the threshold value), for you to continue using the vehicle.
  • You can have a car on a novated lease while bankrupt.
  • You can have a company car provided by your employer while bankrupt.
  • Insurance and registration of your vehicle(s) are your responsibility.
  • If the car you use is leased by your company and your company is going to cease operations, be aware that you may have trouble transferring the lease for the vehicle to your name. If the lease remains in the company’s name and you continue paying the monthly finance payments for your continuing use of the vehicle, be aware that down the track when you sell the vehicle, you may have difficulty signing the rego over to the buyer, as you will no longer be the director of the company.
  • If you have a company vehicle that you wish to keep, and the vehicle has value or equity, to comply with the provisions of the Corporations Act you must pay that amount to the company.


To get further insight into how bankruptcy works, we recommend our article Getting On With Daily Life which can be accessed here

If you have any questions on bankruptcy or would like to discuss your situation, give us a call on 1300 764 197 or email: and we will answer your questions.