Easily the most significant concern many have with Bankruptcy is without a doubt ‘Will I manage to retain my house?’ and it might be complicated, but in some cases it is attainable.
The only justification where you will be obliged to sell your family residence when you declare insolvency is if you have equity in the home so that it is considered an asset. But exactly how does this work? What is equity? Just how much equity makes it an asset? We get the inquiries frequently about Bankruptcy. So below are a few good examples to show you how all of it works and help you understand Bankruptcy. Remember if you wish to know more regarding Bankruptcy and houses don’t hesitate to get in touch with us here at Bankruptcy Experts Sunshine Coast on 1300 795 575, or check out our website: www.bankruptcyexpertssunshinecoast.com.au
Case Study 1. (Tanya & Matt).
5 years ago Matt and Tanya purchased a house in a mining town, they relocated there for work during the mining boom and so prices were high, and life seemed great. However in recent years the work has dried up, prices have gone down and their financial debt has just kept growing. Now they are needing to look at Bankruptcy due to significant debts and home mortgage.
They bought the home for $450,000, and they have $80,000 in various other debts.
They definitely would like to keep their home but wonder if they could. They know that residential property prices, if anything, have declined in the town in the last 5 years so to be safe they think that their home is at present only worth $450,000 after all these years. To make sure they browsed www.realestate.com.au sold category of the site to see what other properties in the streets close by have sold for lately.
Over the past 5 years they have just been repaying the interest, so they currently owe the initial $450,000.
Current House Value = $450,000.
Current Mortgage Value = $450,000.
Net Equity Value = $0.
As there is no equity in this particular property the trustee will not ask Tanya and Matt to sell their house when they declare bankruptcy, so long as they maintain the mortgage payments then all will be fine for them for the 3 years they are in bankruptcy.
At the end of the bankruptcy amount of time the trustee will contact them and inquire if they want to take control of ownership of their home again and provided that it has not increased in price over the 3 years they have been bankrupt they will be asked to make an offer to get their house back. This is usually somewhere between $3,000 and $5,000 to cover the legal expenses of modifying the land title deed etc. This was a pretty basic scenario to demonstrate how a home may be taken into consideration 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 residential area of Sunshine Coast for $850,000. They tipped in $50,000 as a down payment and now the townhouse two years later is worth $900,000.
Current House Value = $900,000.
Current Mortgage Value = $800,000.
Net Equity Value = $100,000.
Because of a recent business issue Bill is about $240,000 in the red. Michelle who does work in banking has a different job and no other debt apart from the home loan. Bill can not pay out his debts so he is taking a look at Bankruptcy. Michelle is worried that she too may have to file for bankruptcy or be driven into it because of the home loan.
Within this particular situation the trustee is required to gain access to or get their hands on Bill’s share of the equity which is $50,000 less marketing costs. They may carry this out in a few ways; 1. Have them sell off the house. 2. Ask Michelle to buy Bills half of the equity. 3. keep them in the home – but it’s very improbable in this case that the trustee will be happy to leave Bill and Michelle in the home as there is just a lot of equity.
So Michelle might have the capacity to acquire Bill’s percentage of the equity by coming up with $50,000 and buying out Bills’ half and from that moment its now 100 % Michelle’s house.
Property and Bankruptcy in Australia is complex and tricky. These two examples above are simply the tip of the iceberg as far as your options in Sunshine Coast are concerned. If you need to know much more about Bankruptcy and houses don’t hesitate to speak to us here at Bankruptcy Experts Sunshine Coast on 1300 795 575, or take a look at our website: www.bankruptcyexpertssunshinecoast.com.au.