Easily the most significant concern many have with Bankruptcy is without a doubt ‘Can I manage to retain my home?’ and it might be complicated, but occasionally it is attainable.
The only good reason where you will be obliged to sell your family house when you declare bankruptcy is if you have equity in the home so that it is thought as an asset. But how does this work? What is equity? How much equity can make it an asset? We receive the inquiries frequently about Bankruptcy. So here are a few examples to show you how all of it works and help you understand Bankruptcy. Remember if you wish to know more concerning Bankruptcy and houses don’t hesitate to get in contact with us here at Bankruptcy Experts Whitsundays on 1300 795 575, or check out our website: www.bankruptcyexpertswhitsundays.com.au
Case Study 1. (Tanya & Matt)
5 years ago Matt and Tanya bought a house in a mining town, they relocated there for their job during the mining boom and so prices were higher, and life looked good. However recently the work has dried up, prices have gone down and their debt has just kept increasing. Now they are having to take a look at Bankruptcy as a result of significant financial obligations and home mortgage.
They bought the home for $450,000, and they have $80,000 in additional unpaid debts.
They really want to keep their house but question if they could. They know that house prices, if anything, have decreased in the town in the last 5 years so to be safe they think that their home is currently only worth $450,000 after all these years. To make sure they searched www.realestate.com.au sold section of the website to see what other homes in the streets nearby have sold for most recently.
Over the past 5 years they have only been repaying the interest, so they currently owe the original $450,000.
Current House Value = $450,000.
Current Mortgage Value = $450,000.
Net Equity Value = $0.
Considering that there is no equity within this specific residential property the trustee will not ask Tanya and Matt to sell their house when they declare bankruptcy, provided that they keep up the mortgage repayments then all will be well for them for the 3 years they are in personal bankruptcy.
At the end of the bankruptcy time period the trustee will contact them and ask if they want to take control of ownership of their property again and provided that it has not increased in price over the 3 years they have been bankrupt they will be requested to make an offer to have their house back. This is usually somewhere around $3,000 and $5,000 to pay for the legal fees of changing the land title deed etc. This was a rather simple example to show how a house may be considered by a trustee when there is no equity involved.
Case Study 2. (Bill & Michelle Johnson)
2 years ago Bill and Michelle bought a townhouse in a nice suburb of Whitsundays for $850,000. They tipped in $50,000 as a down payment and now the townhouse two years later is valued at $900,000.
Current House Value = $900,000.
Current Mortgage Value = $800,000.
Net Equity Value = $100,000.
Because of a recent business complication Bill is about $240,000 in the red. Michelle who does work in banking has a separate job and no other personal debts besides the mortgage. Bill can not pay his debts so he is having a look at Bankruptcy. Michelle is concerned that she too may have to file for insolvency or be driven into it as a result of the home loan.
Within this particular situation the trustee is required to gain access to or get their hands on Bill’s half of the equity which is $50,000 less selling expenses. They might do this in a couple of ways; 1. Have them sell off the home. 2. Invite Michelle to buy Bills half of the equity. 3. keep them in the house – but it’s very improbable with this situation that the trustee would be happy to leave Bill and Michelle in the home since there is just a lot of equity.
So Michelle may have the ability to acquire Bill’s percentage of the equity by coming up with $50,000 and buying out Bills’ fifty percent and from that time its now 100 % Michelle’s home.
Property and Bankruptcy in Australia is complex and tricky. These two examples above are just the tip of the iceberg as far as your options in Whitsundays are concerned. If you need to know much more about Bankruptcy and houses do not hesitate to speak to us here at Bankruptcy Experts Whitsundays on 1300 795 575, or have a look at our website: Bankruptcy Whitsundays