|
Bankruptcy Case Studies In Respect Of "Your
Car"
If you have not yet read the law set
out in the Insolvency Act regarding this issue and wish to
do so click here now.
Background
Following a long term illness Peter got
into financial difficulty. During that period "Peter
had to rob Paul" to enable any payments to be made against
his eight credit card balances. Although Peter has now regained
his health and has started PAYE employment he had to petition
for his bankruptcy. Peter lives twenty miles away from his
place of employment and needs his two year old Ford Focus
to get to work. The car is valued at £7000.
Question
Will the Official Receiver (O.R.) acting
in Peter's bankruptcy seize Peter's car or will he do a deal
with Peter.
Solution
The O.R. is bound to follow the rules
set out in section 283.
- As Peter needs a car for the
purposes of his work Peter will be allowed by the O.R. to
own a car.
- The O.R. will allow Peter to
have a car of "reasonable value". There are no
hard and fast rules as to what is a "reasonable value"
vehicle. (Many O.R's have an internal rule that a car of
reasonable value should only be worth £1000 to £2000.)
- In this particular case as Peter
was undertaking a round trip of 40 miles a day negotiations
ensued with the O.R. and it was agreed that Peter needed
a reliable car and that such a vehicle could be bought for
£4000.
- The Ford Focus was sold for
£7000, the O.R. retained £3000 and the sum of
£4000 was given to Peter to buy a replacement vehicle.
Comment
In cases of dispute between the bankrupt
and the O.R. as to what is a "reasonable value"
the court can make a decision.
The bankrupt should be wary of going
down the court route as the O.R. will have a number of recent
precedents that he can give to the judge who will determine
the matter.
Such court hearings are not
expensive as in most cases such
as these the judge will make a decision within ten minutes.
|
