Bankruptcy’s Effect on Logbook Loans: What You Need to Know
Bankruptcy is often the last resort for people who have gotten in over their head with debt. Although no one wants to file for bankruptcy, the truth is that it’s the best option in many cases. Bankruptcy has a tremendous effect on your credit as well as your assets, including your logbook loan. Here’s what you should know.
What Is Bankruptcy?
Technically, bankruptcy is the term given to a legal status that applies to you when you cannot pay off your debt. You can file your own bankruptcy petition with the court, or the High Court can declare you as bankrupt if one or more creditors present petitions that prove you are unable to repay debts as promised. Bankruptcy effectively (and legally) resolves you of these debts, but it often comes at a cost.
How Does Bankruptcy Work?
Whether you file bankruptcy on your own or the High Court declares you bankrupt based on petitions from creditors, there are several things that can happen. You’ll have a trustee appointed to your case called the Official Receiver, and it’s this individual’s job to determine the value of your assets and sell them to resolve your debts. For example, if you own your home, you may be forced to sell that the property. This is especially true if you have plenty of equity in your home. If you own one or more cars, you may also be forced to sell those, too.
There are some things that are not treated as assets that can be sold to resolve bankruptcy debt, though. For example, tools and vehicles that you need to work cannot be sold to pay off debt per the law. This also applies to any household items that your family needs; the court cannot order you to sell things like clothing, furniture, bedding, etc.
Can I File Bankruptcy on a Logbook Loan?
If you are filing bankruptcy, or if the court has declared you bankrupt, then your logbook loan will likely be included in your list of affected creditors. Although the courts may not sell your car to repay debts, your logbook lender certainly can, and this is likely what will happen if you file bankruptcy – even if you use your car for work. You signed an agreement with that lender that you would repay the loan as promised or allow the lender to take possession of the car, so if the loan will not be repaid, you will likely lose possession.
Is There a Way to Keep My Car?
If you are considering bankruptcy, the only way you will be able to keep your car is if you use it for work. However, as mentioned, your logbook lender can still take possession of it when you file bankruptcy while your loan is outstanding. Thus, if you want to keep your car, you’ll need to completely repay your logbook loan before your bankruptcy is filed. This way, you no longer owe the lender, so that creditor will not be included in your bankruptcy. Keep in mind that it is up to your Official Receiver to ultimately determine whether you use your car for work, and if this is not the case, you may be forced to sell it to resolve other debts.
Bankruptcy can and does affect your assets, so understanding which assets are affected – and in which circumstances – can help you make better decisions about your financial future. When it comes to bankruptcy and logbook loans, it is very possible that the lender will take possession of your car to resolve your debt.