The most significant concern numerous people have with Bankruptcy is without a doubt ‘Can I manage to keep my home?’ and it might be complicated, but occasionally it is possible.
The only good reason where you will be required to sell your family home when you declare bankruptcy 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 get the inquiries all the time about Bankruptcy. So here are a few good examples to demonstrate to you how all of it works and help you understand Bankruptcy. Remember if you want to know more concerning Bankruptcy and houses don’t hesitate to get in contact with us here at Bankruptcy Experts Brisbane on 1300 795 575, or check out our website: www.bankruptcyexpertsbrisbane.com.au
Case Study 1. (Tanya & Matt).
5 years ago Matt and Tanya purchased a house in a mining town, they relocated there for work during the mining boom therefore prices were higher, and life looked great. However in recent times the work has dried up, prices have gone down and their financial debt has just kept increasing. Now they are needing to take a look at Bankruptcy as a result of substantial financial obligations and home mortgage.
They purchased the home for $450,000, and they have $80,000 in additional debts.
They really would like to keep their home but question if they can. They know that residential property prices, if anything, have gone down in the area 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 researched www.realestate.com.au sold category of the website to see what various 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 original $450,000.
Current House Value = $450,000.
Current Mortgage Value = $450,000.
Net Equity Value = $0.
Considering that there is no equity in this specific residential property the trustee will not ask Tanya and Matt to sell their house when they go bankrupt, so long as they maintain the mortgage repayments then all will be fine for them for the 3 years they remain in bankruptcy.
At the end of the bankruptcy period of time the trustee will write to them and ask if they want to take over ownership of their property again and provided that it has not grown in price over the 3 years they have been bankrupt they will be asked to make an offer to have their home back. This is typically somewhere between $3,000 and $5,000 to pay for the legal costs of changing the land title deed etc. This was a pretty basic scenario to demonstrate how a house 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 Brisbane for $850,000. They tipped in $50,000 as a deposit and now the townhouse two years later is valued at $900,000.
Current House Value = $900,000.
Current Mortgage Value = $800,000.
Net Equity Value = $100,000.
As a result of a recent business problem Bill is about $240,000 in the red. Michelle who does work in banking has a different job and no other financial debts apart from 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 have to file for insolvency or be driven into it because 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 costs. These professionals could do this in a few ways; 1. Have them sell off the home. 2. Invite Michelle to purchase Bills half of the equity. 3. leave them in the home – but it’s very unlikely in this scenario that the trustee would be happy to keep Bill and Michelle in the home as there is just a lot of equity.
So Michelle may have the ability to purchase Bill’s share 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 confusing and tricky. These two examples above are just the tip of the iceberg as far as your options in Brisbane are concerned. If you should know much more about Bankruptcy and houses don’t hesitate to speak to us here at Bankruptcy Experts Brisbane on 1300 795 575, or have a look at our website: www.bankruptcyexpertsbrisbane.com.au.