Easily the most considerable worry many have with Bankruptcy is without a doubt ‘Can I manage to retain my house?’ and it can be complicated, but in some cases it is achievable.
The only reason 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 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 frequently about Bankruptcy. So below are a few scenarios to demonstrate to you how it all works and help you comprehend Bankruptcy. Keep in mind if you want to know more relating to Bankruptcy and houses do not hesitate to get in contact with us here at Bankruptcy Experts Mackay on 1300 795 575, or check out our website: www.bankruptcyexpertsmackay.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 high, and life seemed great. However recently the work has dried up, prices have gone down and their debt has just kept increasing. Now they are needing 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 definitely wish to keep their home but wonder if they can. They know that residential property prices, if anything, have declined in the area in the last 5 years so to be safe they think that their house is presently only worth $450,000 after all these years. To make sure they browsed www.realestate.com.au sold section of the website to see what other homes in the streets close by have sold for most recently.
Over the past 5 years they have only 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 particular property the trustee will not ask Tanya and Matt to sell their home when they go bankrupt, so long as they maintain the mortgage payments then all will be well for them for the 3 years they are in insolvency.
At the end of the bankruptcy time period the trustee will write to them and inquire if they wish to take control of ownership of their property again and provided that it has not grown in price over the 3 years they have been insolvent 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 fees of changing the land title deed etc. This was a pretty simple example 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 suburb of Mackay 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 debt. Michelle who does work in banking has a separate job and no other financial debts besides the home loan. Bill can not pay his financial obligations so he is taking a look at Bankruptcy. Michelle is concerned that she too may have to file for bankruptcy or be driven into it as a result of the home loan.
Within this specific case the trustee is required to gain access to or get their hands on Bill’s share of the equity which is $50,000 less marketing fees. These professionals might do this in a couple of ways; 1. Have them sell the house. 2. Ask Michelle to purchase Bills half of the equity. 3. leave them in the home – but it’s quite unlikely in this situation that the trustee will be happy to leave Bill and Michelle in the home because there is simply too much equity.
So Michelle might have the capability to acquire 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 property.
Property and Bankruptcy in Australia is difficult to understand and complicated. These two case studies above are simply the tip of the iceberg as far as your options in Mackay are concerned. If you need to know much more about Bankruptcy and houses do not hesitate to contact us here at Bankruptcy Experts Mackay on 1300 795 575, or take a look at our website: www.bankruptcyexpertsmackay.com.au.