For many people considering bankruptcy, one of the first practical concerns is what will happen to their car.

You may rely on your vehicle to travel to work, take children to school, attend appointments or simply manage day-to-day life. Understandably, the thought of losing that transport can make an already difficult financial situation feel even more uncertain.

The good news is that declaring bankruptcy in Australia does not automatically mean losing your car.

Whether you can keep your vehicle depends on several factors, including its value, how much equity you have in it, whether it is primarily used for transport and whether there is finance owing on the vehicle.

As a Registered Trustee with more than 10 years' experience specialising in personal insolvency and bankruptcy, I regularly help people understand how these rules apply to their individual circumstances. Bankruptcy can have significant consequences, but it is important to understand those consequences clearly rather than assume that every asset will automatically be taken.

Can You Keep a Car During Bankruptcy in Australia?

In many circumstances, yes.

Under Australia's bankruptcy rules, you are generally able to keep a vehicle that you use mainly for transport provided your equity in the vehicle remains within the applicable indexed limit.

As at 1 July 2026, the protected vehicle amount is $9,950. The Australian Financial Security Authority (AFSA) updates this amount each financial year, so the current threshold should always be checked when assessing your position.

There are generally three important considerations:

• The equity value of your vehicle
• Whether you use the vehicle primarily for transport
• Whether you continue making repayments if the vehicle is under finance

AFSA confirms that bankruptcy itself does not prevent a person from owning a vehicle, although restrictions apply to the amount of equity that can be retained.

This means the answer is not simply based on how much you originally paid for your car.

What Does the $9,950 Vehicle Limit Actually Mean?

One of the most common areas of confusion is the difference between the market value of a vehicle and the equity you have in it.

If you own your car outright, its current market value will generally be the relevant figure.

If your vehicle is financed and the finance is secured against the car, the calculation is different.

Current market value of the vehicle minus the amount owing to the secured lender = your equity

For example, suppose your car currently has a market value of $18,000 and you still owe $12,000 to the lender.

Your approximate equity would be:

$18,000 - $12,000 = $6,000 equity

In this example, the vehicle may fall within the current protected vehicle threshold because it is the $6,000 equity that is relevant rather than simply the $18,000 market value.

AFSA specifically uses equity when assessing a vehicle and defines it as the value of the vehicle less the amount still owing against it.

However, other factors can still affect the outcome, which is why your overall position needs to be considered rather than relying on the value alone.

What Happens If My Car Is Worth More Than the Limit?

If your equity in the vehicle exceeds the protected amount, your trustee may have an interest in the vehicle.

That does not necessarily mean that the entire value simply disappears into the bankruptcy.

AFSA explains that where a trustee claims and sells a vehicle because its equity exceeds the allowable limit, the allowable protected amount is refunded to the bankrupt person, with the remaining available proceeds being dealt with through the bankruptcy administration.

For example, imagine you own a car outright with a current market value significantly above the protected vehicle limit.

Your trustee may consider whether selling that vehicle would provide funds for creditors after allowing for the protected amount and the costs associated with a sale.

The exact outcome will depend on the circumstances.

This is an important reason to understand your asset position before entering bankruptcy, rather than making assumptions about what will happen afterwards.

What If My Car Is Under Finance?

Having car finance does not automatically mean you lose your vehicle when you become bankrupt.

However, there are two separate issues to consider:

1. Your trustee's interest in the equity in the vehicle
2. The secured lender's rights under your finance agreement

A car loan where the vehicle is used as security is generally a secured debt.

Bankruptcy does not remove the secured lender's rights over the vehicle. If you want to keep a financed car, you generally need to continue making the required repayments and comply with your finance agreement.

AFSA states that if repayments fall behind, the secured creditor may be able to repossess and sell the vehicle.

This is different from many unsecured debts, such as ordinary credit cards or personal loans, which may be dealt with through the bankruptcy.

If keeping your financed car is important to you, it is therefore necessary to look at whether the ongoing repayments are realistically affordable.

What Happens If I Cannot Afford the Car Repayments?

Your circumstances may be different if the vehicle repayments themselves are contributing to your financial difficulty.

You may decide that continuing with the finance is no longer sustainable.

If a secured vehicle is surrendered or repossessed and the lender sells it for less than the balance owing, there may be a remaining amount known as a shortfall.

AFSA explains that a shortfall arising after a secured vehicle is sold can generally be included in the bankruptcy, meaning the creditor can no longer pursue the bankrupt person for that remaining debt where it is covered by the bankruptcy.

Whether keeping or surrendering a financed vehicle makes sense is therefore not purely a legal question.

It is also a practical financial decision.

Keeping a car with repayments that you cannot reasonably maintain may simply create further pressure. On the other hand, reliable transport may be essential for your employment and family circumstances.

Both sides need to be considered carefully.

What If I Own More Than One Car?

The protected amount does not necessarily apply separately to every vehicle you own.

Where you have more than one vehicle used primarily for transport, AFSA considers the combined equity value of those vehicles against the applicable threshold.

For example, owning two inexpensive vehicles does not automatically mean that each vehicle receives a separate protected amount.

Your trustee will look at the overall equity position.

This can be particularly relevant for households where a person owns:

• A car and motorcycle
• Two cars
• A car and work vehicle
• Other forms of transport

The way each vehicle is used and its ownership will also matter.

Does the Vehicle Have to Be Used for Transport?

Yes. This is an important part of the exemption.

AFSA states that the vehicle needs to be used by you primarily as a means of transport. The definition can extend beyond an ordinary passenger car and may include vehicles such as motorcycles, scooters, trucks, trailers, bicycles and boats where they are genuinely used primarily for transport.

However, simply owning something capable of being driven does not automatically make it protected.

For example, a motorbike held primarily as a collector's item rather than used for transportation may be treated differently.

AFSA also identifies caravans, motorhomes and campervans differently from vehicles protected under the transport exemption.

Again, the actual circumstances and use of the asset matter.

What If I Own the Car Jointly With My Partner?

Joint ownership does not necessarily mean your partner automatically loses their share of the vehicle because you become bankrupt.

Joint ownership does not necessarily mean your partner automatically loses their share of the vehicle because you become bankrupt.

For example, if a vehicle has $12,000 in total equity and you genuinely own 50%, your share of that equity may be $6,000.

AFSA explains that if a bankrupt person's share exceeds the applicable protected amount, possible outcomes can include the trustee selling the vehicle, allowing the co-owner to purchase the bankrupt person's interest, or selling the asset and distributing the proceeds according to the respective interests.

Joint ownership can become more complicated where contributions towards the purchase price, loan repayments and actual ownership do not match the names appearing on registration documents.

It is therefore important to provide your trustee with accurate information about how the vehicle was purchased and who actually owns it.

What If the Car Is Registered in Someone Else's Name?

Registration alone may not always determine ownership.

For example, a person considering bankruptcy might regularly drive a vehicle registered in a partner's or family member's name.

Your trustee may investigate who actually owns the vehicle.

According to AFSA, this assessment may involve considering:

• Whose name appears on loan documents
• Who provided the money to purchase the vehicle
• The history and use of the vehicle
• Whether the vehicle was provided as a gift
• Whether finance or another security interest is registered over it

The important point is to be open about the circumstances.

Attempting to hide ownership by transferring or registering assets in somebody else's name before bankruptcy can create much more serious issues.

Do I Have to Tell My Trustee About My Car?

Yes.

You are required to disclose your assets when entering bankruptcy and provide accurate information to your trustee.

AFSA states that assets must be disclosed when you apply for bankruptcy and that assets received during bankruptcy may also need to be disclosed. Penalties can apply where required information is not provided.

Even if you believe your car falls well below the protected amount, it should still be properly disclosed.

Your trustee can then assess whether it is protected.

Trying to conceal an asset is very different from legitimately owning an asset that bankruptcy law allows you to retain.

Transparency is an important part of the bankruptcy process.

Can I Buy Another Car While I Am Bankrupt?

Bankruptcy does not completely prevent you from buying a vehicle.

AFSA states that a bankrupt person can purchase a vehicle provided the equity remains within the applicable protected amount. A vehicle with equity above the threshold may potentially be claimed by the trustee.

There are additional considerations if you intend to borrow money to purchase the vehicle.

Bankruptcy has rules around obtaining credit and, above the applicable disclosure threshold, you must tell the credit provider that you are bankrupt. The credit disclosure amount is separately indexed and can change.

You also remain responsible for debts you take on during bankruptcy.

Before financing another vehicle, it is worth considering whether the repayments comfortably fit within your financial position.

Should I Sell or Transfer My Car Before Bankruptcy?

This is an area where professional advice can be particularly important.

Selling an asset before bankruptcy is not necessarily prohibited. People sell and replace assets for legitimate reasons all the time.

However, transactions made before bankruptcy may be reviewed by a trustee.

You should not assume that giving a vehicle to a family member, transferring it for very little money or moving ownership into somebody else's name will protect it from bankruptcy.

A trustee's role includes investigating your financial affairs and dealing appropriately with assets available to creditors.

If you are considering bankruptcy and are concerned about your car, it is generally better to seek advice before making significant changes to its ownership.

Will Bankruptcy Affect My Ability to Get to Work?

Bankruptcy law recognises that people need a reasonable means of transport.

That is one reason a protected vehicle amount exists.

Your car can be especially important where you:

• Travel to and from work
• Work shifts when public transport is limited
• Transport children or dependants
• Live in a regional area
• Need to attend medical or other regular appointments
• Use a vehicle as part of your normal transport arrangements

However, needing a vehicle does not automatically mean that an expensive vehicle with substantial equity will be completely protected.

Your trustee must apply the bankruptcy rules to the value and circumstances of the asset.

The Vehicle Threshold Changes Over Time

The $9,950 vehicle amount referred to in this article is current from 1 July 2026.

It should not be treated as a permanent figure.

AFSA indexes the protected vehicle amount each financial year.

This is particularly important when reading older bankruptcy information online. An article written several years ago may contain a vehicle threshold that is no longer current.

Before making a decision based on the value of your car, check the latest indexed amount or seek advice about the figure that applies at the relevant time.

Bankruptcy Is About Your Overall Financial Position

The question, "Can I keep my car if I declare bankruptcy?" is important, but it should not be considered in isolation.

Your car is only one part of the broader consequences of bankruptcy.

Bankruptcy can affect your:

• Other assets
• Property
• Income
• Debts
• Access to credit
• Overseas travel
• Financial position during the bankruptcy period

Most importantly, bankruptcy is not automatically the right solution simply because debts have become difficult to manage.

Depending on your circumstances, there may be other options available.

These can include informal arrangements with creditors, hardship arrangements or formal personal insolvency options such as a Personal Insolvency Agreement.

Understanding the full position before making a decision allows you to compare the benefits, responsibilities and consequences rather than focusing only on one asset.

How I Can Help You Understand What Happens to Your Car

If you are considering bankruptcy and are worried about losing your vehicle, you do not need to make assumptions about what will happen.

As a Registered Trustee, I can help you look at your circumstances in practical terms, including:

• The current market value of your vehicle
• Any finance secured against it
• The equity you actually hold
• Whether you jointly own the vehicle
• How the vehicle is used
• How the current indexed threshold may apply
• Your broader asset and debt position
• Whether bankruptcy or another insolvency option may be appropriate

Every financial situation is different.

My approach is to explain the process clearly, answer your questions and help you understand both the immediate and longer-term implications before you make a decision.

A Clearer Way Forward

Declaring bankruptcy does not automatically mean you will lose your car.

If your vehicle is primarily used for transport and your equity falls within the applicable protected amount, you may be able to keep it. If the vehicle is financed, continuing to meet the requirements of the secured lender is also important.

Where the equity exceeds the protected threshold, your trustee will need to assess the vehicle and determine how it should be dealt with.

The most important step is understanding how the rules apply to your actual circumstances.

If you are experiencing financial difficulty or considering bankruptcy, you can speak with Clare Corrigan Personal Insolvency for a confidential discussion about your position and the options available to you.