One of the most common questions asked by people considering bankruptcy is what will happen to personal items and possessions. As a general rule, you can keep all your belongings. However, there are some exceptions.
Contents
- Are your household possessions at risk if you go bankrupt?
- What happens to your children’s possessions?
- Do you have to hand over savings and Crypto Currency?
- Does the Official Receiver visit your home?
- Will you have to return possessions you have bought on finance?
- What happens to possessions or items worth more than £500?
Are your household possessions at risk if you go bankrupt?
If you are thinking about going bankrupt, you will probably worry about what happens to your household possessions. Will a bailiff turn up at your door with a white van and take your TV and your children’s Ipads?
The fact is, you don’t have to be concerned. The Official Receiver (OR) is almost certainly not interested in the belongings you have at home.
The reason for this is that they only have an interest if any single item you own is worth more than £500. This valuation is based on the realistic 2nd hand value. It is not the new replacement value.
Why isn’t the OR interested? Because it would normally cost far more to pay someone to visit your home and take your everyday possessions away than any funds that could possibly be raised from their sale.
Can you keep your White Goods and Electronic Devices?
Don’t worry. You can keep all your kitchen appliances and household electronics after going bankrupt. No-one is going to take away your washing machine, TV, Iphone or laptop.
The purchase price of these items may have been hundreds of pounds. However, their individual second hand value is very low. As such the Official Receiver has no interest in them.
What happens to garden equipment like your lawnmower?
You can keep the items you have in your garden shed or garage. You don’t have to worry about having to give up your lawn mower or other garden equipment. As with your household possessions, you get to keep them all.
Are your Engagement and Wedding Rings at risk?
Even though more may have been paid for them originally, your wedding or engagement ring are not at risk if you go bankrupt. This is because these items are generally worth less than £500 on the 2nd hand market.
The Official Receiver will make this assumption and won’t ask you about them. You don’t have to list these possessions on your bankruptcy application.
What happens to your children’s possessions?
Your children’s toys are not at risk if you go bankrupt. But what about more expensive items? Are their laptops, Ipads, games consoles or bikes at risk?
The answer is no. In the same way as with your more general household electronics items, the Official Receiver has no interest in your kids stuff. This is regardless of who may or may not actually own the possessions.
These items are simply of no interest to the OR because in reality, their second hand re-sale value is very low. Almost certainly below £500 per individual item.
Do you have to hand over savings and Crypto Currency?
The Official Receiver is interested in any savings and investments you may have. These are not treated in the same way as general household possessions. You must declare any savings and will be expected to hand these over the Official Receiver.
Savings and investments are not just the cash you have in a savings account. The OR is also able to claim things such as ISA accounts and any shares you own.
You must also tell the OR about any Crypto Currency. They will expect you to assist them by cashing these deposits and transferring the resulting funds to their bank account.
Savings in your children’s names are not at risk (even if you manage these on their behalf). However, if your child’s money is saved in an account in your name, this will be treated as yours. As a result, the Official Receiver will have a legitimate claim on it.
If you have any unrealised crypto currency, the OR will wait and expect you to assist them with cashing this when it becomes unlocked (even if this is after your discharge date).
Does the Official Receiver visit your home?
You may be concerned that the Official Receiver will want to visit your home to check on what possessions you have. The reality is they do not visit your property.
In almost all cases, it is simply not worth the time and money required to visit every person who goes bankrupt.
The OR will normally make the assumption that you don’t have anything particularly valuable. If you did, it is likely that you would have already sold it to raise funds to try and pay your debt.
It is possible that the OR will visit if you have a business related premises which might contain valuable tools and equipment.
Will you have to return possessions you have bought on finance?
Where you are paying for any household possessions with store credit, these do not have to be returned.
Common examples are things like furniture which you have bought from stores such as DFS. Alternatively electronic goods from stores like Curries. The finance you pay could be with organisations such as Creation or Klarna.
Once you go bankrupt, you must stop paying the associated finance. Your bankruptcy will write off this debt. However, you can keep the associated items.
The store is not out of pocket because they have already received payment by the financial company. The finance company has no interest in recovering physical assets. They are not set up to do this and the associated costs would far outweigh any money raised from resale. They are simply out of pocket.
What happens to possessions or items worth more than £500?
If you own items which have a second hand value of more than £500, you must declare them. The Official Receiver does have an interest in these possessions.
They will decide on a case by case basis whether or not you will need to hand over the item to them for sale.
Is your car at risk?
Most commonly, the only possession you are like to have worth more than £500 is your car. The rules regarding vehicles are different to other possessions. You will normally be allowed to keep your vehicle if it is worth up to £1500. If it is worth more, you may have to sell and get a cheaper one.
Are self employed tools at risk?
If you are self employed, you may have tools that you need to do your job which you feel are worth more than £500.
Remember, it is only individual items worth more than £500 on the second hand market that are at risk. This means that your hand tools and general work items are almost certainly not of interest.
Where you own any particular item of equipment worth more than £500 2nd hand, you will not necessarily have to give it up. However, you will need to put a plan in place of how to deal with it before you go bankrupt.
If you believe you own equipment worth more than £500, speak to us before you go bankrupt. We will advise on how you can make sure the items are not at risk.
Written by James Falla
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