The biggest concern a lot of people have when they come to our company regarding Bankruptcy is generally 'Can I keep my house?' and sometimes the answer is yes, you can keep your house.
The only reason you may be forced to sell
your family home when you file for bankruptcy is actually due to the fact that
you have a lot of equity in the house that it is regarded as an asset. Please
check out these straightforward hypothetical case studies below to get your
head around Bankruptcy and how it has an effect on houses in Australia.
Remember If you want to know more regarding Bankruptcy and houses feel free to
consult with us here at Bankruptcy Advice Australia on 1300 879 867, or visit
our website: www.bankruptcy-advice.com.au/Australia.com.au
Case Study 1. (Mike & Sue Smith).
5 years ago Mike and Sue bought a house in
a mining town for $450,000. At this time the mining boom was helping keep all
the property prices nice and high. Now they are needing to look at Bankruptcy
since they have massive debts of $80,000 on top of their mortgage and credit
card and tax debt.
They really want to keep their house but
wonder if they can, they know that house prices if anything have gone down in
the area in the last 5 years so to be safe they think that their home is
currently 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 close by have sold for recently.
However they have not paid any principal of
the home loan over the last 5 years, mainly just interest, so they still owe
$450,000.
Current House Value = $450,000.
Current Mortgage Value = $450,000.
Net Equity Value = $0.
Because there is no equity in this property
the trustee will not ask Mike and Sue to sell their home when they go bankrupt,
as long as they keep up the mortgage payments then all will be well for them
for the 3 years they are in bankruptcy.
At 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 house again and so long as it has not increased in price over the 3 years
they have been bankrupt they will be asked to make an offer to have their house
back. This is usually somewhere between $3,000 and $5,000 to cover the legal
costs of changing the land title deed etc.
Now let's have a look at a slightly
different example of Bankruptcy and houses.
Case Study 2. (Bill & Michelle
Johnson).
2 years ago Bill and Michelle purchased a
townhouse in a lovely suburb of Australia 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 failing
Bill is about $240,000 in debt. Michelle who does work in banking has a
separate job and no other debt except for the mortgage. Bill cannot pay his
debts and so he is reviewing Bankruptcy. Michelle is bothered that she too may
need to declare bankruptcy or be obliged into it due to the house loan.
Within this particular case the trustee is
required to access or get their hands on Bill's part of the equity which is
$50,000 less selling costs. They may do this in a few ways; 1. Make them sell
the home. 2. Invite Michelle to buy Bills half of the equity. 3. leave them in
the home - but It's very unlikely in this case that the trustee would be happy
to leave Bill and Michelle in the house because there is just too much equity.
So Michelle may have the opportunity to
purchase Bill's share of the equity by coming up with $50,000 and buying out
Bills' half and from that moment its now 100 % Michelle's house.
Property and Bankruptcy in Australia is
confusing and demanding, these two case studies above are just the tip of the
iceberg as far as your options in Australia are concerned. If you need to know
more about Bankruptcy and houses feel free to call us here at Bankruptcy Advice
Australia on 1300 879 867, or head to our website:
www.bankruptcy-advice.com.au/Australia.com.au.
