Buying a Car During Bankruptcy – What You Need to Know

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Are you in bankruptcy proceedings and need a car? In principle, this is possible—but there are important rules to follow so that you can keep your vehicle and not jeopardize your discharge of remaining debts.

Basic Information: No Ban, but Caution Is Advised

Buying a car during insolvency is not prohibited. However, your assets are subject to the supervision of the trustee (in consumer insolvency) or the insolvency administrator (in standard insolvency). This means that the source of the purchase funds and the value of the vehicle play a decisive role.

What happens to a newly purchased car?

A vehicle you purchase during the ongoing proceedings is considered a new acquisition and generally falls within the insolvency estate (Section 35(1) InsO). The trustee can therefore liquidate it—even if you paid for it with your exempt income.

Exception: If you absolutely need the car for your gainful employment (not just for commuting to work, which you could also manage by public transportation), it may be protected from attachment under § 811(1)(5) ZPO. The same applies in cases of severe health impairments.

Value Threshold and Substitute Seizure

Even if the vehicle is protected from seizure, the trustee may carry out a so-called substitute seizure for higher-value vehicles (generally over 5,000–10,000 €): The trustee provides you with a less expensive vehicle and adds the additional proceeds to the insolvency estate.

Where can the money come from?

The trustee verifies whether you used attachable assets or reportable income to make the purchase:

• Inheritances and gifts must be reported to the trustee—half of these must be transferred to the estate (Section 295(1)(2) of the Insolvency Code (InsO)).
• Savings from the garnishment exemption are not automatically protected—the Federal Court of Justice (BGH) has ruled that these may also be included in the estate.

Financing During Insolvency

Car financing is very difficult in practice:

• Banks almost always reject loan applications while insolvency proceedings are ongoing.
• New debt can worsen your financial situation and jeopardize your discharge of remaining debt.
• If financing is possible at all, it is usually only available under very unfavorable terms.

Practical Recommendations

1. Inform the trustee before making a purchase—even if formal approval is not required, this will help you avoid problems later on.
2. Document the professional necessity—provide supporting evidence (employment contract, work locations, lack of public transportation access).
3. Keep the vehicle’s value low—an affordable, suitable vehicle has the best chance of remaining in your possession.

We’re here to help

As a service and interpreting agency for Romanian clients in Germany, we’re here to support you: We help you communicate with trustees, government agencies, and counseling centers—in your language and with an understanding of your situation. Contact us if you need assistance with any questions regarding your bankruptcy.

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