A bankrupt and their assets
When an individual is declared bankrupt, all property, money or other assets belonging to them at the commencement of the bankruptcy vest automatically in the Trustee without any formal transfer. Certain assets, however, are exempt and so do not form part of their bankruptcy estate.
Items such as clothing, bedding, furniture, household equipment and ‘provisions as are necessary for satisfying the basic domestic needs of the Bankrupt and their family’ may be retained. In addition, items that are necessary for a Bankrupt’s employment, business or vocation, such as tools, books, vehicles and other items of equipment, do not form part of their bankruptcy estate.
What about getting to work? If the Bankrupt relies on their car to get to work, and no other reasonable alternative method of transport exists, then they may be able to retain their car too.
Vehicles subject to finance (e.g. hire purchase, leasing agreement) are not, however, exempt from the Bankrupt’s estate. If a Bankrupt has a vehicle subject to finance, then the Trustee will review the finance agreement and consider whether there is any benefit (i.e. equity) in claiming the vehicle for the bankruptcy estate.
If the Trustee does not claim for the vehicle, they will notify the Bankrupt and the finance company. Depending on the terms of the finance agreement, the finance company may in any event take action to recover the vehicle and terminate the finance agreement as a consequence of the bankruptcy.
Where any items are excluded from the bankruptcy estate and it appears to the Trustee that the sale value of such items exceeds the cost of a reasonable replacement, the property may, within a prescribed timeframe, be claimed by the Trustee for the bankruptcy estate and “replaced” by the Trustee with a reasonable alternative. For example, a Trustee may require a Bankrupt to replace an expensive vehicle with a more modest alternative. The aim of all these provisions is to prevent a Bankrupt from simply continuing to enjoy a “pre-bankruptcy lifestyle” at the expense of their creditors.
Sarah Mower is a solicitor in the Business Services Team at Barker Gotelee, Ipswich Solicitors.
If you would like to know more about the implications of bankruptcy, please call the Business Services Team on 01473 611211 or drop Sarah an email.