Easily the most significant issue many have with Bankruptcy is without a doubt ‘Will I manage to retain my house?’ and it may be complicated, but sometimes it is achievable.
The only good 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 thought as an asset. But exactly how does this work? What is equity? Just how much equity can make it an asset? We receive the problems all the time about Bankruptcy. So below are a few scenarios to show you how it all works and really help you comprehend Bankruptcy. Bear in mind if you want to know more regarding Bankruptcy and residential properties feel free to get in touch with us here at Bankruptcy Experts Cassowary Coast on 1300 795 575, or check out our website: www.bankruptcyexpertscassowarycoast.com.au
Case Study 1. (Tanya & Matt).
5 years ago Matt and Tanya purchased a house in a mining town, they moved there for work during the mining boom and so prices were higher, and life looked good. However in recent times the work has dried up, prices have dropped and their financial debt has just kept increasing. Now they are having to take a look at Bankruptcy because of significant personal debts and mortgage.
They purchased the house for $450,000, and they have $80,000 in other unpaid debts.
They really would like to keep their house but wonder if they could. They know that residential property prices, if anything, have dropped in the town 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 searched www.realestate.com.au sold section of the website to see what other homes in the streets nearby have sold for recently.
Over the past 5 years they have just been paying off 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 particular residential property the trustee will not ask Tanya and Matt to sell their home 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 remain in personal bankruptcy.
At the end of the insolvency amount of time the trustee will contact them and ask if they wish to take control of ownership of their property again and provided that it has not increased in price over the 3 years they have been bankrupt they will be requested to make an offer to have their house back. This is generally 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 sample 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 Cassowary Coast 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.
Because of 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 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 insolvency or be driven into it due to the home loan.
In this particular situation the trustee is required to access or get their hands on Bill’s half of the equity which is $50,000 less selling costs. They could carry this out in a couple of ways; 1. Have them sell off the home. 2. Invite Michelle to buy Bills half of the equity. 3. leave them in the house – but it’s very unlikely with this situation that the trustee would be happy to leave Bill and Michelle in the home considering that 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’ fifty percent and from that moment its now 100 % Michelle’s house.
Property and Bankruptcy in Australia is challenging and tricky. These two examples above are simply the tip of the iceberg as far as your options in Cassowary Coast are concerned. If you need to know more about Bankruptcy and residential properties do not hesitate to contact us here at Bankruptcy Experts Cassowary Coast on 1300 795 575, or check out our website: www.bankruptcyexpertscassowarycoast.com.au.