The most significant concern numerous people have with Bankruptcy is without a doubt ‘Can I manage to retain my home?’ and it can be complicated, but in some cases it is attainable.
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 considered an asset. But how does this work? What is equity? Just how much equity can make it an asset? We get the concerns constantly about Bankruptcy. So below are a few instances to show you how all of it works and really help you learn about Bankruptcy. Keep in mind if you want to know more regarding Bankruptcy and residential properties do not hesitate to get in contact with us here at Bankruptcy Experts Townsville on 1300 795 575, or check out our website: www.bankruptcyexpertstownsville.com.au
Case Study 1. (Tanya & Matt).
5 years ago Matt and Tanya bought a house in a mining town, they relocated there for their job during the mining boom and so prices were high, and life seemed good. However in recent times the work has dried up, prices have dropped and their financial debt has just kept increasing. Now they are needing to look at Bankruptcy as a result of significant personal debts and mortgage.
They purchased the house for $450,000, and they have $80,000 in various other debts.
They definitely want to keep their home but wonder if they could. They know that house prices, if anything, have gone down 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 searched www.realestate.com.au sold section of the website to see what other houses in the streets nearby have sold for most 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.
Considering that there is no equity within this specific property the trustee will not ask Tanya and Matt to sell their house when they go bankrupt, as long as they maintain the mortgage repayments then all will be well for them for the 3 years they remain in insolvency.
At the end of the bankruptcy amount of time the trustee will write to them and inquire 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 have their home back. This is generally somewhere between $3,000 and $5,000 to cover the legal fees of modifying the land title deed etc. This was a pretty simple scenario to demonstrate how a house 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 Townsville for $850,000. They tipped in $50,000 as a down payment 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 personal debts besides the home loan. Bill can not pay his financial obligations so he is having a look at Bankruptcy. Michelle is worried that she too may have to file for bankruptcy or be driven into it due to the home loan.
In this particular case the trustee is required to access or get their hands on Bill’s half of the equity which is $50,000 less selling expenses. They may accomplish this in a couple of ways; 1. Have them sell the home. 2. Invite Michelle to purchase Bills half of the equity. 3. keep them in the house – but it’s very improbable in this scenario that the trustee would be happy to leave Bill and Michelle in the house because there is simply too much equity.
So Michelle might have the ability to buy Bill’s percentage of the equity by coming up with $50,000 and buying out Bills’ half and from that time its now 100 % Michelle’s property.
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 Townsville are concerned. If you need to know more about Bankruptcy and houses do not hesitate to contact us here at Bankruptcy Experts Townsville on 1300 795 575, or have a look at our website: www.bankruptcyexpertstownsville.com.au.