Easily the most significant worry many have with Bankruptcy is without a doubt ‘Can I manage to keep my house?’ and it can be complicated, but occasionally it is achievable.
The only justification 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 looked as an asset. But exactly how does this work? What is equity? Just how much equity makes it an asset? We get the concerns all the time about Bankruptcy. So below are a few examples to demonstrate to you how everything works and really help you learn about Bankruptcy. Remember if you wish to know more regarding Bankruptcy and residential properties don’t hesitate to get in contact with us here at Bankruptcy Experts Dandenong on 1300 795 575, or check out our website: www.bankruptcyexpertsdandenong.com.au
Case Study 1. (Tanya & Matt).
5 years ago Matt and Tanya purchased a house in a mining town, they relocated there for their job throughout the mining boom therefore prices were high, and life appeared good. However in recent years the work has dried up, prices have dropped and their financial debt has just kept increasing. Now they are needing to look at Bankruptcy because of considerable financial debts and mortgage.
They bought the home for $450,000, and they have $80,000 in various other unpaid debts.
They really wish to keep their home but wonder if they could. They know that house prices, if anything, have dropped in the area in the last 5 years so to be safe they believe that their house is currently only worth $450,000 after all these years. To make sure they browsed www.realestate.com.au sold section of the website to see what various other homes in the streets nearby have sold for recently.
Over the past 5 years they have only been repaying the interest, so they still owe the original $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 go bankrupt, so long as they maintain the mortgage payments then all will be well for them for the 3 years they are in personal bankruptcy.
By the end of the insolvency period of time the trustee will write to 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 requested to make an offer to get their house back. This is typically somewhere between $3,000 and $5,000 to cover the legal expenses of modifying the land title deed etc. This was a fairly simple example to show how a home 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 Dandenong 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 different job and no other financial obligations apart from the home mortgage. Bill can not pay out his financial debts so he is taking a look at Bankruptcy. Michelle is concerned that she too may have to file for bankruptcy or be driven into it because of the home loan.
Within this specific instance 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 fees. They might carry this out in a few ways; 1. Have them sell off the home. 2. Ask Michelle to buy Bills half of the equity. 3. keep them in the home – but it’s quite improbable in this scenario that the trustee will be happy to keep Bill and Michelle in the home as there is just a lot of equity.
So Michelle might have the capability to purchase 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 difficult to understand and tricky. These two examples above are simply the tip of the iceberg as far as your options in Dandenong are concerned. If you need to know more about Bankruptcy and residential properties don’t hesitate to contact us here at Bankruptcy Experts Dandenong on 1300 795 575, or take a look at our website: www.bankruptcyexpertsdandenong.com.au.