Will I lose my car if I go bankrupt?

The current protected amount for a vehicle is $9,100 (as at March 2024). What this means is that if your vehicle is worth less than $9,100 you will simply be allowed to keep it. If it is worth more than that, your Trustee in Bankruptcy would sell the vehicle and return the protected amount of $9,100 to you so that you can buy a cheaper one. Any excess funds would then be put toward your bankrupt estate.

But what if your vehicle is still under finance? The “protected amount” actually refers to available equity in the vehicle, which means that for the Trustee to sell it, there would need to be a positive difference between the vehicle value and the loan of more than $9,100 – they would need to get more than the protected amount after paying out the secured vehicle loan with the sale proceeds. So if your vehicle was worth $20,000 and you still had $10,000 owing, the Trustee would sell it, give you $9,100 and put $900 ($10,000 – $9,100) towards your bankruptcy. But if it was worth $20,000 and you owed $15,000, the trustee wouldn’t likely sell it. It is actually quite rare to owe less than what the vehicle is worth as cars do not go up in value, so in many cases, if your vehicle is still under finance, you will be able to keep it.

In the event that the vehicle is registered in more than one name, any available equity will be divided by the number of owners. If your portion of the equity is greater than the protected amount it will be sold – you will receive your $9,100, and all other owners will be paid out their full share. If you own more than one vehicle, you will be allowed to keep one only.

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