Going bankrupt may mean you lose some of your belongings. The bankruptcy trustee can sell some types of belongings and give the proceeds to your creditors. Therefore, you need to make sure you understand whether bankruptcy will affect the things you own.
This page explains what can happen to your belongings if you go bankrupt.
Cars and other vehicles
Any cars or other vehicles you own will usually be sold unless they’re protected from the trustee or exempt. Examples of when a vehicle would be exempt are if it is essential for work or caring for a dependant. It would also be exempt if you need the vehicle for your basic needs, for example, if you have a disability and need a car to avoid being housebound and entirely dependent on others.
If an exempt vehicle is so valuable that selling it would raise enough money to pay for a cheaper, suitable vehicle for you, and there would be money left over to give to creditors, the bankruptcy trustee may arrange for this to happen.
What happens to your belongings?
When a bankruptcy order is made, all the belongings you own become the property of the trustee, apart from items which are protected from the trustee or exempt. When ownership of the goods passes to the trustee, this is called being vested. You mustn’t do anything to sell or give away these belongings.
Any belongings that come into your possession before you’re discharged from bankruptcy can also be claimed by the trustee.
The trustee will then look at selling these items in order to make payments towards your creditors.
If you owe money to people or companies in the EU
Any debts you owe people or companies in the EU might not be covered by bankruptcy.
Your creditors could keep asking you for money, for example by calling you and sending you letters.
If you live in the EU, they could take you to court in the EU.
EU creditors still have to sue here in the UK rather than abroad in the EU, even if they have an existing judgment. The UK will recognise EU judgements entered or started before 31 December 2020.
If you live in the UK but have a home in the EU with a mortgage from an EU lender, the lender could take you to court in the EU.
Get legal advice if you have EU creditors. Find free or affordable legal help.
Can you stop your goods from being sold?
Generally, most of your household items won’t be sold. There are some goods that are protected from sale or exempt. This means you can usually keep the following items, unless the trustee thinks they can be replaced with a suitable and cheaper alternative:
- tools, books and other items of equipment that you need to use personally in your job, business or vocation
- clothes
- bedding
- furniture
- household equipment, such as a cooker
- other belongings that are necessary for your basic family needs.
Any items which aren’t needed for your job, business or vocation, or to satisfy your basic home needs, can be sold, including:
- antiques
- jewellery
- leisure equipment, such as games consoles and cameras
- caravans.
If you disagree with the decision to sell an item
If you think the trustee is acting unreasonably in taking or selling something that you own, for example because you believe it’s necessary for your family life, you can challenge the decision. You’ll need to apply to the court to do this. You should get advice and try asking the trustee to change their mind before you decide whether to apply to the court.
If you disagree with the valuation of an item
If you disagree with how much an item has been valued at, you can get an independent valuation yourself. Show this to the trustee and ask them if they’ll change their mind.
Can you hide or give away your belongings?
You mustn’t hide or give away any belongings to avoid them being sold. This is a criminal offence and could lead to you being fined or sent to prison.
More about bankruptcy offences
Passport
Your passport can be taken away by the court if you’re made bankrupt. This is called being impounded. This would normally only happen if the court thinks you might try to leave the country to get rid of your belongings of value.
Jointly owned belongings
If you own goods jointly with someone else, these may be sold. If this applies to you, the trustee will take the following steps:
- approach the other owner to try to agree a value for your share of the goods
- offer the other owner the chance to buy out your share of the goods
- if the other owner doesn’t agree, the trustee may apply for a court order to sell the goods.
If the belongings are sold, the proceeds from the sale will be split between the trustee and the other owner.
Goods bought on hire purchase
If you have goods you’re paying for on hire purchase, there will normally be a clause in the agreement which lets the hire purchase company end the agreement if you become bankrupt. If this happens, you may have to return the item.
If you want to keep the goods, you may be able to persuade the hire purchase company not to cancel the agreement and ask the trustee if you can carry on making payments. However, the trustee may also take the goods and sell them.
Next steps
More information
‘What will happen to my motor vehicle?’ – from the Insolvency Service at www.gov.uk