Bankruptcy And The Family Home

Can I Keep My House
With No Equity?

Bob and Sue reside in Queensland and own their family home. Times have actually not been good and they have chosen to apply for bankruptcy. They are extremely worried about what will happen to their house. In this particular case study, we will look at what really happens in Qld when you file for bankruptcy with a house without any equity in it.

Bob and Sue’s home is presently valued at $700,000 and the mortgage owing to the bank is also $700,000 meaning that they have no equity in their house. So, what will actually happen to Bob and Sue’s house now that they are going to declare bankruptcy?

House Has $30k or more in equity.

House Has $30k or More in Equity

Bob and Sue have made the very difficult decision to apply for bankruptcy, the biggest concern is their family house on which they have a mortgage for $670,000. Their house is valued at $700,000 so they have $30,000 equity in the property.

So, in Queensland, what will happen to their home when they file for bankruptcy? In this case study we can consider the equity as anything above $30,000 so this would be the same scenario as if their equity was $30,000, $100,000, $300,000 or $1,000,000 it does not make any difference the principle is the same.

House Has $30k or more in equity.

House Is Owned By
One Partner
?

There is a general assumption in Queensland that if a property is owned by one partner in a relationship that is not going bankrupt then the house is safe if the other partner declares bankruptcy. This is not the case and you need to be very careful about this assumption.

In this case study Bob and Sue have been married for 15 years but their house is entirely in Sue’s name. Bob’s name is not on the title or on the mortgage but they have both lived in the property for the whole 15 years they have been together. Bob is needing to declare bankruptcy.

Surrendering the House to the Bank.

Bob and Sue have come to the difficult decision to declare bankruptcy and they are considering what to do with the house as they have no equity in it and they simply cannot afford the mortgage any longer.

So, Bob and Sue choose to surrender their house to the bank. The very first thing we at Bankruptcy Advice Sunshine Coast would do for them is get them to sign a legal document which is like a deed of release meaning they have voluntarily surrendered their home. This means the bank does not need to pursue legal action to have them removed from the house. Bob and Sue would then vacate the property, although sometimes the bank might ask the residents to remain and live in the property to assist them in selling it.

surrendering the house to bank

Selling the House to a Family Member Prior to Bankruptcy, Is It Legal?

Bob and Sue have made a decision to apply for bankruptcy and have decided that because they own their family house they do not want to lose it. However, Bob and Sue can no longer afford to make the payments and pay the other bills associated with home ownership. Instead of simply selling their house out on the open market Bob’s uncle has decided he would like to buy the property. The question is, in Queensland can Bob and Sue legally sell their property to a family member before they go bankrupt? The answer is yes, in some cases. Where people go really wrong in this situation is selling their home to a relative, or someone they know, at a greatly reduced rate. This causes all sorts of problems not only for the people applying for bankruptcy but additionally for the person who buys the property.
A Question of Caveats

A Question of Caveats

Bob and Sue have owned a property for many years, have worked really hard and have $200,000 equity in their home. Their home is valued at $700,000 and they currently have about $500,000 on their mortgage.

Bob is a builder in Qld and has really been struggling due to the fact that he injured his back. He owes $150,000 in overdue accounts to a particular hardware outlet who have actually been very patient with Bob and are aware of his situation. However, they are just not able to wait any more, so to make certain that they get their payment for the account they have placed a caveat over Bob and Sue’s property.

A Question of Caveats

Names on House Titles

In Qld the name or names on the title of a property are very important in bankruptcy, however, it is not the be all and end all. For example, some of our clients call and ask if they can alter who is on the title of their property to try to protect that property before they go bankrupt. In this case of Bob and Sue, Sue owns the house and needs to declare bankruptcy and she has some equity in the house. They do not wish to lose the house so to protect it Bob and Sue decide that Sue should transfer the title to Bob’s name and take her name off of the property.
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Big 5 Questions

– Is Going Bankrupt Right for me?
– Will I lose my job?
– How will my income be affected?
– Can I keep my house or car?
– Will I lose my business or can I still be self-employed?

If you are considering bankruptcy, being able to answer these questions is vital. Then you’ll know exactly what will happen to your business and assets should you choose to file for bankruptcy. Feel free to download our eBook for free and inform yourself today. Or, if your questions are more complex, call us directly on 1300 879 867.

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When The House is in Your Partners Name and They Don’t Need to Go Bankrupt.

Bob is seriously thinking about bankruptcy and believes that he has no choice. He has serious concerns because his wife Sue owns the Sunshine Coast house that they reside in and he is extremely worried about what will happen to that property should he apply for Bankruptcy. In this case study we explore what happens to the property when the house is purely in Sue’s name and Bob’s name is neither on the title nor on the mortgage.
When The House is in Your Partners Name, and They Don’t Need to go Bankrupt.

When the House Is In Your Name, You Need To Go Bankrupt And Your Partner Has Contributed To The House.

In the following case studies we look into the implications when one partner who owns the property applies for bankruptcy. Does the other partner who is not on the title have any claim to keep some of the equity in the property?

Bob owns a Sunshine Coast house worth $700,000 he owes the bank $600,000 and as a result has $100,000 equity in the property. Bob now needs to go bankrupt and he’s very worried about losing his home when he declares bankruptcy, especially considering his partner Sue has been contributing financially towards mortgage payments for the last 5 years.

Why would you go bankrupt if you had equity in your house?

Why Would You Go Bankrupt If You Had Equity In Your House?

Bob and Sue have owned their Sunshine Coast house for several years and have worked really hard to build up some equity in the property. Their house is presently valued at $700,000 and they owe the bank $600,000 giving them $100,000 equity. In this case study Bob and Sue have a combined debt of $180,000, far greater than the $100,000 equity they have in their home.
Why would you go bankrupt if you had equity in your house?

Can I Sell My House To A Family Member Before I Go Bankrupt ?

This is a question that, on the surface of it, sounds awfully risky, however it is not if you understand what you are doing and things are carried out in an appropriate commercial manner.

Let us say Bob and Sue own a property worth $700,000 and they owe $650,000 on the mortgage. They desperately want to hold on to the Sunshine Coast property as it has some sentimental value and some practical implications as Sue’s grandmother resides in a granny flat out the back and their disabled child needs the wheelchair access set up at the property.

But I Have Mortgage Insurance?

Five years ago when Bob and Sue were looking to purchase a home in Qld all they could manage to pull together was a deposit of 5%. When they bought their house they went to the bank and the bank was fine with the 5% deposit but they had to also pay for mortgage insurance. Bob and Sue were happy to pay the mortgage insurance because they didn’t have the required 20% deposit to eliminate paying mortgage insurance premiums and it meant that they could purchase a house earlier.
But I Have Mortgage Insurance?

What If My Partner Wants To Buy My Share of the Property When I go Bankrupt?

Bob needs to go bankrupt however his partner Sue does not. They own a Sunshine Coast house together worth $700,000 and they have $100,000 equity in the house. Bob has actually realised that he can no longer afford to contribute to paying the mortgage on the property and is needing to go bankrupt. Sue on the other hand does not wish to lose the family home that they have worked so hard to keep.

Bob and Sue need to find out if there is any way when Bob declares bankruptcy that Sue can potentially buy out Bob’s interest in the property and retain their home.

I Have Heard My Property Can Be Tied Up for Eight Years or More When I Go Bankrupt

I Have Heard My Property Can Be Tied Up for Eight Years or More When I Go Bankrupt?

Let us examine under what circumstance your house could be tied up for more than the 3 year minimum bankruptcy period. Let us say that when Bob and Sue declared bankruptcy they decided that they wanted to try and keep their Sunshine Coast home after bankruptcy. At the time they declared bankruptcy the house was worth $700,000 and they still owed the bank the entire $700,000. As there was no equity in the house at this time the trustee decided not to take any additional action regarding the property. Bob and Sue could stay living in the property as long as they keep making the mortgage payments. Their life will go on with the house to be re-evaluated at the end of the 3 year bankruptcy period.
I Have Heard My Property Can Be Tied Up for Eight Years or More When I Go Bankrupt

What If I Can Not Keep Paying the Mortgage Halfway Through My Bankruptcy ?

Bob and Sue declared bankruptcy eighteen months ago without any equity in their family home. They had made a decision they would attempt to keep the property so that at the end of the 3 years they had somewhere to live. However, after a year Bob lost his job due to illness and Sue then got retrenched from her work. This meant that they no longer had any capacity to continue to pay the mortgage. In this case it is quite straightforward, Bob and Sue contact the trustee and the bank and let them know that they can no longer afford to make the payments on the mortgage and that they will be moving out.

What If I Decide to Hand the House Back to the Bank When I Go Bankrupt, How Long Do I Have Before I Am Required to Leave?

Bob and Sue have struck a few financial obstacles and have decided to declare bankruptcy. They cannot afford to keep up the mortgage payments and so have chosen to walk away from their family home. The question is, when bankrupt how long have Bob and Sue got before they will be required to leave the property?
Bankruptcy Experts - Case Study -  What if i decide to hand the house back to the bank when i go bankrupt, how long do i have before i need to leave?

Surely We Can Keep
Our Family Home
When I Go Bankrupt?

Bob and Sue have finally faced the reality of declaring bankruptcy and they, like a great deal of people confronting bankruptcy, are thinking surely we will not lose our family house, we need to live somewhere.

Unfortunately in many bankruptcy situations, as we have seen in these case studies, keeping your home is not an easy process. Sometimes it is just not possible. Keeping your house in bankruptcy is all about the money, it is not about the sentimental value, emotional value or your own specific circumstances it is a very cut and dry procedure.

What If My House Was Purchased With an Inheritance?

Bob and Sue have been living in their Sunshine Coast family home for five years and about two years ago Sue inherited a large sum of money from her Aunty June. Bob and Sue made a decision to put the inheritance money into their mortgage to help them pay off their home.

The question is, if Sue puts her inheritance money towards their property, is that money safe if Bob and Sue decide they have to apply for bankruptcy? In Qld the answer to that question is no, it is not safe at all.

What if i purchase my house

I Bought a House With Compensation Money, Is That Money Safe If I Go Bankrupt?

Bob and Sue have been residing in their family house for several years. About five years ago Bob had a major accident at work, he received a large compensation payout from his employer which he put into the house mortgage. The question is, if Bob decides to file for bankruptcy is that compensation money safe or will he lose it?
I bought a house with Compensation Money is it safe If I go bankrupt?

Will I Still Have to Pay Rates, Insurance and Body Corp If I Go Bankrupt?

Bob and Sue are applying for bankruptcy and have come to the heart-breaking decision to leave their Sunshine Coast property as they have no equity in it. They are going to hand it back to the bank but the question is will they still be liable to pay the rates and insurance after they hand the house back.

On the day they declare bankruptcy Bob and Sue will no longer continue to be the owners of their house.