The most significant concern many have with Bankruptcy is without a doubt ‘Can I manage to retain my home?’ and it can be complicated, but occasionally it is possible.
The only 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 looked as an asset. But how does this work? What is equity? Just how much equity makes it an asset? We receive the problems constantly about Bankruptcy. So here are a few examples to demonstrate to you how all of it works and help you understand Bankruptcy. Keep in mind if you wish to know more concerning Bankruptcy and residential properties do not hesitate to get in contact with us here at Bankruptcy Experts Taree on 1300 795 575, or check out our website: www.bankruptcyexpertstaree.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 higher, 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 financial obligations and mortgage.
They bought the house for $450,000, and they have $80,000 in additional debts.
They really would like to keep their home but wonder if they can. They know that residential property prices, if anything, have dropped in the area in the last 5 years so to be safe they believe that their home is at present only worth $450,000 after all these years. To make sure they browsed www.realestate.com.au sold section of the site to see what other houses 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 original $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 declare bankruptcy, so long as they keep up the mortgage repayments then all will be well for them for the 3 years they are in insolvency.
At the end of the insolvency amount of time the trustee will write to them and inquire if they wish to take control of ownership of their home again and provided that it has not grown in price over the 3 years they have been bankrupt they will be asked to make an offer to have their home back. This is typically somewhere between $3,000 and $5,000 to pay for the legal fees of changing the land title deed etc. This was a pretty basic example to show how a house 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 Taree for $850,000. They tipped in $50,000 as a deposit and now the townhouse two years later is valued at $900,000.
Current House Value = $900,000.
Current Mortgage Value = $800,000.
Net Equity Value = $100,000.
Due to a recent business issue Bill is about $240,000 in debt. Michelle who carries out work in banking has a different job and no other financial debts besides the home mortgage. Bill can not pay his financial obligations so he is having a look at Bankruptcy. Michelle is concerned that she too may have to file for bankruptcy or be driven into it due to the house loan.
Here in this specific case 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 fees. These professionals may carry this out in a few ways; 1. Have them sell off the house. 2. Invite Michelle to purchase Bills half of the equity. 3. leave them in the house – but it’s quite unlikely in this situation that the trustee would be happy to keep Bill and Michelle in the home as there is simply a lot of equity.
So Michelle might have the capacity to buy Bill’s percentage of the equity by coming up with $50,000 and buying out Bills’ fifty percent and from that moment its now 100 % Michelle’s property.
Property and Bankruptcy in Australia is challenging and tricky. These two examples above are just the tip of the iceberg as far as your options in Taree are concerned. If you should know much more about Bankruptcy and houses do not hesitate to get in touch with us here at Bankruptcy Experts Taree on 1300 795 575, or check out our website: www.bankruptcyexpertstaree.com.au.