If you have run into financial difficulties, you may be considering bankruptcy as a last-resort option.

You may also be wondering how filing for bankruptcy will affect the rest of your life, including your ownership of your car.

After all, without a car, how will you get to work to continue to pay your ongoing expenses? Fortunately, there are several scenarios that will allow you to keep your vehicle, even after claiming bankruptcy.

Here’s what you need to know about bankruptcy and its impact on your car.

Keeping Your Car During Bankruptcy

You can take heart in knowing that you will likely be able to keep your car. In fact, many bankrupt people do.

However, you and your vehicle must meet certain criteria in order to qualify.

Value of the Vehicle

The first point of consideration is the value of your car.

Each year, the Australian Financial Security Authority (AFSA) sets the maximum value for a vehicle you can own during bankruptcy.

In 2025, that amount is $9,400. This amount is based on what a dealer would pay to buy the vehicle from you, not the amount you would pay to buy the car.

Typically, the dealer price is several thousand dollars lower than the amount you would pay.

This calculation also takes into account how much is still owing on your auto loan. For example, if you own a car that is worth $20,000 and you still owe $15,000, the calculated value would be $5,000.

This would fall under the limit, allowing you to keep your vehicle. If, on the other hand, you only owed $5,000 on that $20,000 vehicle, the value would be $15,000.

In this case, you may be required to sell the car to cover your outstanding debts.

You would, however, still be eligible to keep the $7,900 set out in the limit so that you could purchase a less expensive car.

However, this policy applies only to certain types of vehicles, such as cars, motorcycles, scooters, trucks, trailers, bicycles or boats.

Caravans, motorhomes and campervans are excluded even within the set threshold.

What if I have two cars?

If you own more than one vehicle, AFSA allows you to keep them only if the combined equity value of all vehicles is below a set threshold, which is $9,100 as of the 2024–2025 financial year. If your total equity exceeds the threshold, your bankruptcy trustee may require you to sell one or more vehicles or give you the option to buy back the excess equity. 

In some cases, a third party (such as a family member) can pay the difference to help you retain ownership. 

But note that these rules apply specifically to vehicles used primarily for personal transport—business-related vehicles may be assessed differently.

Other Means of Transport

In order to keep your vehicle, it must be your primary mode of transportation.

If you live close to your office and ride a bicycle or walk to work, you would not be eligible to keep your car.

Those who drive to work each day would may able to keep the car as they need it to maintain their employment.

Similarly, if you use your vehicle in the course of your job duties, you would likely be able to keep it.

Ongoing Auto Loan Repayments

If you still have money owing on your auto loan, you must continue to make the repayments after declaring bankruptcy if you wish to keep the vehicle.

Fortunately for many, getting rid of other debts through bankruptcy can free up some of your cash each month, making it easier to keep up with the repayments on the auto loan.

If you do fall behind on your repayments though, the lender can repossess your vehicle as outlined in the terms of your loan.

Your Ownership Portion

In some cases, you may own a vehicle in partnership with someone else, like a romantic partner or flatmate.

In this scenario, you would only own a portion of the vehicle, so only your portion of the vehicle’s value would be used in determining whether or not you are allowed to keep it.

If you are not allowed to keep your share of the car, either the other owner would have to purchase your portion from you or you would be required to sell the vehicle and split the proceeds.

Buying a Car Under Bankruptcy

If you don’t currently own a car but intend to purchase one in the future, rest assured that you can still by a car during bankruptcy.

However, the value must still be under the set limit so you may not be able to get your preferred vehicle if its value is too high.

Can I get a car loan in bankruptcy?

If you don’t have enough cash to buy a vehicle outright, securing a car loan during bankruptcy can be challenging. Most mainstream lenders hesitate to approve loans for bankrupt individuals due to the risk involved. 

However, some private lenders do offer car loans to people in bankruptcy, provided you can demonstrate reliable income and strong financial discipline. 

Keep in mind, though, that these loans often come with higher interest rates, fees, and stricter terms, which can further strain your finances. 

In many cases, it may be more practical to wait until you’re officially discharged from bankruptcy before applying for a car loan, as this improves your chances of approval and access to better loan conditions. 

But note that bankruptcy affects your credit score, which means accessing any type of loan may still be challenging, but not impossible. You may still apply for a loan even with bad credit.

Fixing bad credit

We always advise our clients to fix their credit scores before applying for a car loan, especially after bankruptcy. 

Taking the time to rebuild your credit can significantly improve your chances of approval and help you qualify for loans with lower interest rates, better terms, and fewer fees. 

Rushing into a loan immediately after being discharged can lead to high-cost repayments that put you right back into financial difficulty.

But ff you’re struggling financially and feel like you urgently need a vehicle, take a step back and look at the bigger picture. Talk to us before you commit to a loan. 

We can help assess your current financial situation to see where you might be able to cut expenses, boost your savings, or explore alternative options. 

Sometimes, even minor adjustments in your budget can open up better financial pathways, without the long-term burden of a high-cost loan.

For free financial advice and more information about bankruptcy, reach out to Debt Negotiators today.

We may be able to assist you with other debt relief options to help you avoid bankruptcy.

Get in touch with us today to get started.