The most considerable worry numerous people have with Bankruptcy is without a doubt ‘Can I manage to retain my house?’ and it may be complicated, but sometimes it is achievable.
The only good reason where you will be obliged to sell your family home when you declare insolvency is if you have equity in the home so that it is looked as an asset. But exactly how does this work? What is equity? How much equity makes it an asset? We receive the questions all the time about Bankruptcy. So here are a few scenarios to show you how everything works and really help you understand Bankruptcy. Keep in mind if you want to know more relating to Bankruptcy and houses don’t hesitate to get in contact with us here at Bankruptcy Experts Tweed Coast on 1300 795 575, or check out our website: www.bankruptcyexpertstweedcoast.com.au
Case Study 1. (Tanya & Matt).
5 years ago Matt and Tanya purchased a house in a mining town, they moved there for their job throughout the mining boom therefore prices were high, and life seemed great. Having said that in recent years the work has dried up, prices have dropped and their financial debt has just kept increasing. Now they are having to take a look at Bankruptcy because of considerable debts and mortgage.
They purchased the home for $450,000, and they have $80,000 in additional debts.
They definitely would like to keep their home but question if they could. They know that house prices, if anything, have gone down in the town in the last 5 years so to be safe they think that their house is presently only worth $450,000 after all these years. To make sure they searched www.realestate.com.au sold category of the site to see what other properties in the streets close by have sold for recently.
Over the past 5 years they have solely been paying off the interest, so they still owe the initial $450,000.
Current House Value = $450,000.
Current Mortgage Value = $450,000.
Net Equity Value = $0.
Considering that there is no equity in this particular property the trustee will not ask Tanya and Matt to sell their home when they declare bankruptcy, as long as they keep up the mortgage payments then all will be fine for them for the 3 years they are in bankruptcy.
By the end of the insolvency period of time the trustee will contact them and ask if they want to take over ownership of their property again and provided that it has not grown 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 typically somewhere around $3,000 and $5,000 to cover the legal fees of changing the land title deed etc. This was a fairly simple example to show 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 suburb of Tweed 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 complication Bill is about $240,000 in the red. Michelle who does work in banking has a separate job and no other financial debts besides the mortgage. Bill can not pay out his debts so he is taking a look at Bankruptcy. Michelle is worried that she too may need to file for bankruptcy or be driven into it because of the home loan.
Within this specific 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. These professionals might accomplish this in a few ways; 1. Have them sell the house. 2. Invite Michelle to buy Bills half of the equity. 3. keep them in the home – but it’s quite unlikely with this situation that the trustee will be happy to keep Bill and Michelle in the house because there is simply a lot of equity.
So Michelle may have the capability to purchase Bill’s share of the equity by coming up with $50,000 and buying out Bills’ fifty percent and from that time its now 100 % Michelle’s house.
Property and Bankruptcy in Australia is challenging and complicated. These two case studies above are just the tip of the iceberg as far as your options in Tweed Coast are concerned. If you must know much more about Bankruptcy and residential properties feel free to speak to us here at Bankruptcy Experts Tweed Coast on 1300 795 575, or check out our website: Bankruptcy Tweedcoast