Easily the most significant worry many have with Bankruptcy is without a doubt ‘Will I manage to keep my house?’ and it can be complicated, but in some cases it is achievable.
The only good reason where you will be obliged to sell your family residence when you declare bankruptcy is if you have equity in the home so that it is thought 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 here are a few examples to show you how it all works and help you learn about Bankruptcy. Remember if you want to know more relating to Bankruptcy and residential properties do not hesitate to get in touch with us here at Bankruptcy Experts Emerald on 1300 795 575, or check out our website: www.bankruptcyexpertsemerald.com.au
Case Study 1. (Tanya & Matt).
5 years ago Matt and Tanya bought a house in a mining town, they moved there for work throughout the mining boom therefore prices were high, and life looked good. Having said that recently the work has dried up, prices have dropped and their financial debt has just kept increasing. Now they are needing to take a look at Bankruptcy because of considerable debts and mortgage.
They purchased the house for $450,000, and they have $80,000 in various other debts.
They really want to keep their house but wonder if they can. They know that house prices, if anything, have decreased in the area in the last 5 years so to be safe they believe that their home is presently 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 various other houses in the streets nearby have sold for recently.
Over the past 5 years they have just been paying off the interest, so they currently owe the initial $450,000.
Current House Value = $450,000.
Current Mortgage Value = $450,000.
Net Equity Value = $0.
Because there is no equity in this particular property the trustee will not ask Tanya and Matt to sell their house when they go bankrupt, provided that they keep up the mortgage payments then all will be fine for them for the 3 years they are in personal bankruptcy.
At the end of the bankruptcy amount of time the trustee will write to them and inquire if they want to take over ownership of their house again and provided that it has not increased in price over the 3 years they have been insolvent they will be requested to make an offer to have their home back. This is usually somewhere around $3,000 and $5,000 to cover the legal expenses of modifying the land title deed etc. This was a fairly basic sample to demonstrate 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 residential area of Emerald for $850,000. They tipped in $50,000 as a deposit 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 problem Bill is about $240,000 in debt. Michelle who carries out work in banking has a separate job and no other personal debts besides the home loan. Bill can not pay out his financial debts so he is having a look at Bankruptcy. Michelle is worried that she too may have to file for insolvency or be driven into it due to the house loan.
In this specific instance the trustee is required to access or get their hands on Bill’s half of the equity which is $50,000 less selling costs. These professionals could do this in a few ways; 1. Have them sell off the home. 2. Ask Michelle to purchase Bills half of the equity. 3. leave them in the house – but it’s very unlikely in this case that the trustee will be happy to keep Bill and Michelle in the home as there is just too much 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 property.
Property and Bankruptcy in Australia is challenging and complicated. These two examples above are simply the tip of the iceberg as far as your options in Emerald are concerned. If you need to know much more about Bankruptcy and houses don’t hesitate to get in touch with us here at Bankruptcy Experts Emerald on 1300 795 575, or have a look at our website: www.bankruptcyexpertsemerald.com.au.