Can You Keep Your Car In MAP Bankruptcy?

The rule is more generous than it looks in one way. A qualifying vehicle is taken out of both asset tests rather than squeezed into them.

It is stricter than it looks in another. The £3,000 is a value ceiling and not an equity ceiling, and whether you are eligible covers the other seven conditions that sit alongside it.

How is the £3,000 vehicle limit measured?

A vehicle you reasonably require and which is worth no more than £3,000 is left out of the asset calculation altogether, under section 2(3)(b).

On value, not on your stake in it

Section 2(3)(b) of the Bankruptcy (Scotland) Act 2016 sets a ceiling on the value of a vehicle owned by the debtor, and nothing in it deducts money still owed.

That distinction decides cases. A car worth £4,500 with £3,000 of finance outstanding is not a £1,500 asset for this test, and it will not qualify for the disregard.

Why a qualifying car does not eat the allowance

The subsection says the vehicle is not to be regarded as an asset, and it does so for the purposes of both the £2,000 total and the £1,000 single asset cap.

So the car is removed from the sums completely. It does not use up the headroom you need for everything else you own.

The figure has stood at £3,000 since 30 November 2016 and no other amount has been prescribed in its place.

Where the number has to come from

The Accountant in Bankruptcy’s guidance on assets expects a valuation from an independent recognised source such as Glass’s guide, Parkers or a car dealership.

A figure taken from a classified listing for a similar car is not that. Get the valuation in the form your adviser asks for.

How the figure plays out

What counts as reasonably requiring a vehicle?

The Act does not define it. Section 2(3)(b) uses the words reasonably requires the use of a vehicle, and the Accountant in Bankruptcy looks for a practical explanation rather than a formula.

What the guidance points at

Its Common Financial Tool notes tell advisers to confirm why the vehicle is necessary, giving a work commute, mobility needs and a rural location as examples.

So the question is what the car does for you. A vehicle used to reach a job no bus serves is a different case from a second car kept for convenience.

Explaining the need well

• Say what the journey is, how often it happens and what the alternative would be.
• Mention health or mobility needs, including anyone you care for.
• Note shift times that fall outside public transport hours.
• Be specific about rural distances rather than describing the area as remote.

It is not a test you fail by being honest

Your adviser puts the explanation into the application, and a clear one avoids the delay of a request for further information. Applying for a MAP sets out what that request looks like and how long you get to answer it.

Is the trust deed figure the same?

The figure is £1,000, not the £3,000 most pages print. A trust deed conveys the estate except what would be excluded on sequestration, which routes through section 88(1)(a) of the 2016 Act to section 11(1)(b) of the Debt Arrangement and Attachment (Scotland) Act 2002: a vehicle reasonably required by the debtor and not exceeding £1,000 in value.

Two different routes, two different numbers

The trust deed figure comes from the exemption in section 11 of the Debt Arrangement and Attachment (Scotland) Act 2002, reached through section 88 of the 2016 Act. The Minimal Asset Process figure is written into section 2 itself.

The £3,000 belongs to a different test. Section 2(3)(b) of the 2016 Act opens with the words for the purposes of subsection (2)(c) and (d), which is Minimal Asset Process eligibility, and it has been generalised into advice about trust deeds where it does not apply.

So a car worth £2,500 can be outside the Minimal Asset Process tests and above the trust deed exemption at the same time. Whether you lose your car in a trust deed deals with that route in full.

The four figures, kept apart

Full administration sequestration has a minimum debt of £3,000 under section 2(8)(a). That figure is unrelated to the vehicle disregard, which happens to use the same number.

What the longer bankruptcy route says about cars

The Accountant in Bankruptcy’s debtor guide says you may be able to keep a vehicle reasonably required by you with a value of no more than £3,000. National Debtline states the other side of it: a car worth more than £3,000 may be sold even if you need it for work.

What happens if your car is worth more than £3,000?

The disregard falls away completely. A vehicle above the ceiling is counted at its full value, which breaks both the £1,000 single asset cap and the £2,000 total, and defeats a Minimal Asset Process.

There is no partial relief

The subsection either applies or it does not. A car valued at £3,100 is treated no differently from one valued at £8,000 for the purposes of qualifying.

That is one of the sharpest edges in the whole scheme, and the £25,000 debt limit is the other figure worth checking before an application is prepared.

Where that leaves you

A Minimal Asset Process is not the only route. Full administration sequestration has no asset ceiling, a protected trust deed can be considered, and the Debt Arrangement Scheme repays the debt in full without any insolvency.

Each of those has its own cost. The difference between the two bankruptcy routes sets the first of them out.

Do not sell or transfer the car to get under the limit

Alienating property for no consideration is one of the grounds on which a bankruptcy restrictions order may be made, under section 156. Take advice before doing anything with a vehicle.

Does a car on finance or Motability change anything?

Yes, because section 2(3)(b) applies to a vehicle owned by the debtor. A car on hire purchase or supplied through Motability is not owned outright, which is why different paperwork is asked for.

What the Accountant in Bankruptcy asks for

Its evidence checklist asks for the car agreement where the vehicle is on Motability or hire purchase, and a vehicle valuation for any car owned outright.

Bring the agreement rather than a summary of it. Whether the vehicle is yours is the first question the disregard asks.

Where Motability costs are dealt with

In the budget rather than the asset test. The Accountant in Bankruptcy’s guidance puts scheme costs into the disability allowance in the common financial tool calculation.

Ongoing finance payments are a separate question again. How they sit in your budget is something to work through with your adviser.

Can you buy or change a car during the six months?

Be careful. Anything you acquire after the date of sequestration vests in the trustee as at the date of acquisition, under section 86, and there is no exception for small sums.

Why a replacement is not simply yours

A more valuable car bought during the case is estate that has vested in the Accountant in Bankruptcy as trustee. No court order is needed for that to happen.

It can also end the Minimal Asset Process. Paragraph 2(5)(a) of Schedule 1 lets the modifications cease where your total assets exceed the prescribed figure, and regulation 14 prescribes £2,000 for that purpose.

The reporting duty

The Accountant in Bankruptcy’s guide for MAP debtors says you must report income changes, money received and inheritances. The duty to co-operate with your trustee survives your discharge.

Conversion has real consequences, including a discharge that moves out to a year and a contribution order that can run for 48 months. How long a MAP lasts covers them.

What evidence will your money adviser ask for?

Documents that prove both halves of the test: what the vehicle is worth, and why you need it. They are gathered before the certificate for sequestration is granted.

The file, item by item

You cannot submit the application yourself. An approved money adviser does it for you, and how to apply sets out the order it happens in.

Household goods are outside the count too

Ordinary essential household goods kept inside your home are excluded from vesting by section 88, so they do not count towards the £2,000 either. National Debtline puts it as basic household items not counting.

The risks sit with valuation and with change. How a Minimal Asset Process works covers the case as a whole, and a trust deed against a Minimal Asset Process compares the two where a car is the deciding factor.