The most considerable issue numerous people have with Bankruptcy is without a doubt ‘Can I manage to keep my home?’ and it can be complicated, but in some cases it is possible.
The only justification where you will be required to sell your family residence when you declare insolvency is if you have equity in the home so that it is thought as an asset. But how does this work? What is equity? Just how much equity makes it an asset? We receive the questions constantly about Bankruptcy. So below are a few good examples to demonstrate to you how it all works and help you comprehend Bankruptcy. Remember if you wish to know more regarding Bankruptcy and houses don’t hesitate to get in touch with us here at Bankruptcy Experts Coffs Harbour on 1300 795 575, or check out our website: www.bankruptcyexpertscoffsharbour.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 and so prices were higher, and life appeared good. However in recent years the work has dried up, prices have dropped and their debt has just kept increasing. Now they are needing to take a look at Bankruptcy because of significant debts and home mortgage.
They bought the home for $450,000, and they have $80,000 in various other unpaid debts.
They really want to keep their home but question if they can. They know that house prices, if anything, have gone down 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 searched www.realestate.com.au sold section of the website to see what various other properties in the streets close by have sold for most recently.
Over the past 5 years they have solely been repaying the interest, so they still 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 residential 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 personal bankruptcy.
By the end of the bankruptcy period of time the trustee will write to them and ask if they wish to take over ownership of their property again and provided that it has not increased in price over the 3 years they have been insolvent they will be asked to make an offer to have their home back. This is usually somewhere between $3,000 and $5,000 to cover the legal fees of changing the land title deed etc. This was a pretty simple example to demonstrate 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 suburb of Coffs Harbour 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.
As a result of a recent business issue Bill is about $240,000 in debt. Michelle who carries out work in banking has a separate job and no other financial debts besides the mortgage. Bill can not pay out his financial obligations so he is having a look at Bankruptcy. Michelle is worried that she too may need to file for insolvency or be driven into it as a result of the home loan.
In this specific instance the trustee is required to gain access to or get their hands on Bill’s share of the equity which is $50,000 less selling fees. They could carry this out in a few ways; 1. Have them sell the house. 2. Invite Michelle to purchase Bills half of the equity. 3. keep them in the house – but it’s quite unlikely in this situation that the trustee would be happy to leave Bill and Michelle in the house considering that there is simply a lot of equity.
So Michelle might have the capability to buy Bill’s share of the equity by coming up with $50,000 and buying out Bills’ fifty percent and from that moment its now 100 % Michelle’s house.
Property and Bankruptcy in Australia is complex and complicated. These two examples above are just the tip of the iceberg as far as your options in Coffs Harbour are concerned. If you need to know more about Bankruptcy and residential properties feel free to speak to us here at Bankruptcy Experts Coffs Harbour on 1300 795 575, or have a look at our website: www.bankruptcyexpertscoffsharbour.com.au.