Easily the most considerable worry numerous people have with Bankruptcy is without a doubt ‘Will I manage to retain my home?’ and it can be complicated, but in some cases it is achievable.
The only good reason where you will be required to sell your family home 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? How much equity makes it an asset? We get the problems all the time about Bankruptcy. So here are a few scenarios to demonstrate to you how everything works and help you learn about Bankruptcy. Remember if you wish to know more relating to Bankruptcy and houses don’t hesitate to get in contact with us here at Bankruptcy Experts Hervey Bay on 1300 795 575, or check out our website: www.bankruptcyexpertsherveybay.com.au
Case Study 1. (Tanya & Matt).
5 years ago Matt and Tanya purchased a house in a mining town, they moved there for work throughout the mining boom and so prices were high, and life appeared great. However recently the work has dried up, prices have gone down and their financial debt has just kept growing. Now they are having to look at Bankruptcy due to significant liabilities and home mortgage.
They bought the home for $450,000, and they have $80,000 in other unpaid debts.
They definitely want to keep their home but question if they can. They know that house prices, if anything, have decreased in the region in the last 5 years so to be safe they believe that their home is currently 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 homes in the streets close by have sold for lately.
Over the past 5 years they have only 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.
Considering that there is no equity in this specific residential property the trustee will not ask Tanya and Matt to sell their home when they declare bankruptcy, provided that they keep up the mortgage payments then all will be well for them for the 3 years they are in personal bankruptcy.
At the end of the bankruptcy amount of time the trustee will contact them and ask if they wish to take over ownership of their home again and provided that it has not grown in price over the 3 years they have been insolvent they will be asked to make an offer to have their house back. This is generally somewhere between $3,000 and $5,000 to pay for the legal expenses of modifying the land title deed etc. This was a rather simple 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 suburb of Hervey Bay 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.
Due to a recent business problem Bill is about $240,000 in debt. Michelle who does work in banking has a separate job and no other personal debts apart from the mortgage. Bill can not pay his financial 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 as a result of the home loan.
Within this specific situation the trustee is required to access or get their hands on Bill’s half of the equity which is $50,000 less marketing expenses. They might accomplish this in a couple of ways; 1. Have them sell the house. 2. Ask Michelle to buy Bills half of the equity. 3. keep them in the home – but it’s quite improbable with this instance that the trustee would be happy to keep Bill and Michelle in the home since there is simply a lot of equity.
So Michelle may have the capacity to buy Bill’s share of the equity by coming up with $50,000 and buying out Bills’ half and from that moment its now 100 % Michelle’s home.
Property and Bankruptcy in Australia is confusing and complicated. These two case studies above are simply the tip of the iceberg as far as your options in Hervey Bay are concerned. If you should know more about Bankruptcy and houses don’t hesitate to get in touch with us here at Bankruptcy Experts Hervey Bay on 1300 795 575, or check out our website: www.bankruptcyexpertsherveybay.com.au.