The most significant issue many have with Bankruptcy is without a doubt ‘Will I manage to retain my house?’ and it might be complicated, but in some cases it is achievable.
The only justification 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 looked as an asset. But how does this work? What is equity? How much equity can make it an asset? We receive the inquiries constantly about Bankruptcy. So here are a few scenarios to demonstrate to you how all of it works and help you comprehend Bankruptcy. Keep in mind if you wish to know more relating to Bankruptcy and houses feel free to get in touch with us here at Bankruptcy Experts Lismore on 1300 795 575, or check out our website: www.bankruptcyexpertslismore.com.au
Case Study 1. (Tanya & Matt).
5 years ago Matt and Tanya bought a house in a mining town, they relocated there for work throughout the mining boom therefore prices were higher, and life looked good. Having said that recently the work has dried up, prices have dropped and their debt has just kept growing. Now they are needing to look at Bankruptcy because of substantial liabilities and mortgage.
They purchased the home for $450,000, and they have $80,000 in other unpaid debts.
They definitely wish to keep their house but question if they can. They know that house prices, if anything, have declined in the town in the last 5 years so to be safe they think that their house is at present only worth $450,000 after all these years. To make sure they researched www.realestate.com.au sold section of the site to see what various other properties in the streets close by have sold for recently.
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.
As there is no equity within this specific residential property the trustee will not ask Tanya and Matt to sell their house when they go bankrupt, provided that they keep up the mortgage repayments then all will be fine for them for the 3 years they remain in personal bankruptcy.
At the end of the bankruptcy time period the trustee will write to them and inquire if they wish to take over ownership of their house 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 house back. This is typically somewhere between $3,000 and $5,000 to cover the legal costs of modifying the land title deed etc. This was a fairly basic scenario to show how a home 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 Lismore 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.
Due to a recent business complication Bill is about $240,000 in the red. Michelle who carries out work in banking has a separate job and no other financial debts apart from the mortgage. 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.
Here in this specific situation the trustee is required to access or get their hands on Bill’s share of the equity which is $50,000 less selling costs. These professionals may accomplish 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 quite improbable in this situation that the trustee will be happy to keep Bill and Michelle in the home because there is simply 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’ fifty percent and from that time its now 100 % Michelle’s house.
Property and Bankruptcy in Australia is confusing and tricky. These two examples above are just the tip of the iceberg as far as your options in Lismore are concerned. If you should know much more about Bankruptcy and residential properties do not hesitate to speak to us here at Bankruptcy Experts Lismore on 1300 795 575, or check out our website: www.bankruptcyexpertslismore.com.au.