Easily the most significant concern many have with Bankruptcy is without a doubt ‘Will I manage to keep my house?’ and it may be complicated, but occasionally it is attainable.
The only justification where you will be required to sell your family residence when you declare bankruptcy is if you have equity in the home so that it is considered an asset. But exactly how does this work? What is equity? Just how much equity can make it an asset? We get the inquiries all the time about Bankruptcy. So here are a few examples to demonstrate to you how everything works and really help you comprehend Bankruptcy. Keep in mind if you wish to know more relating to Bankruptcy and residential properties do not hesitate to get in contact with us here at Bankruptcy Experts Rockhampton on 1300 795 575, or check out our website: www.bankruptcyexpertsrockhampton.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 during the mining boom and so prices were high, and life looked good. Having said that in recent times the work has dried up, prices have gone down and their debt has just kept increasing. Now they are having to take a look at Bankruptcy due to substantial financial debts and home mortgage.
They bought the home for $450,000, and they have $80,000 in additional unpaid debts.
They really want to keep their house but wonder if they can. They know that house prices, if anything, have declined in the region in the last 5 years so to be safe they think that their home is presently 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 various other houses in the streets close by have sold for lately.
Over the past 5 years they have only 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.
As there is no equity in this particular property the trustee will not ask Tanya and Matt to sell their home when they go bankrupt, as long as they maintain the mortgage repayments then all will be fine for them for the 3 years they remain in personal bankruptcy.
By the end of the insolvency period of time the trustee will contact them and inquire if they want to take over ownership of their house 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 get their home back. This is generally somewhere between $3,000 and $5,000 to pay for the legal fees of modifying the land title deed etc. This was a fairly basic example 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 suburb of Rockhampton 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.
As a result of a recent business complication Bill is about $240,000 in the red. Michelle who carries out work in banking has a different job and no other financial obligations besides the mortgage. Bill can not pay his financial obligations so he is having a look at Bankruptcy. Michelle is worried that she too may need to file for bankruptcy or be driven into it due to the house loan.
Within 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 marketing costs. They could carry this out in a couple of ways; 1. Have them sell off the house. 2. Invite Michelle to purchase Bills half of the equity. 3. keep them in the home – but it’s very unlikely in this instance that the trustee would be happy to keep Bill and Michelle in the home as there is simply too much equity.
So Michelle may have the capability to purchase 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 home.
Property and Bankruptcy in Australia is challenging and complicated. These two case studies above are simply the tip of the iceberg as far as your options in Rockhampton are concerned. If you should know more about Bankruptcy and houses do not hesitate to contact us here at Bankruptcy Experts Rockhampton on 1300 795 575, or check out our website: www.bankruptcyexpertsrockhampton.com.au.