The greatest question a lot of people have
when they come to our business regarding Bankruptcy is simply 'Can I manage to
keep my house?' and sometimes the truth is yes, you can keep your house.
The only reason you are going to be driven
to sell your family home when you file for bankruptcy is due to the fact that
you have a great deal of equity in the home that it is deemed an asset. Please
check out these straightforward hypothetical case studies below to get your
head around Bankruptcy and how it affects houses in Australia. Remember If you
have to know more about Bankruptcy and houses feel free to get in touch with us
here at Bankruptcy Australia on 1300 795 575, or go to our website:
www.bankruptcyexpertsAustralia.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 keeping all the
property prices nice and high. Now they are needing to look at Bankruptcy given
that they have massive debts of $80,000 on top of their mortgage and credit
card and tax debt.
They really wish 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 homes in
the streets nearby have sold for recently.
Having said that 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
particular property the trustee will not ask Mike and Sue to sell their house
when they go bankrupt, as long as they keep up the mortgage payments then all will
be well for these people 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 want to take over ownership of
their house again and as long as 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 house
back. This is usually somewhere between $3,000 and $5,000 to cover the legal
costs of modifying the land title deed etc.
Now let's look at a slightly different example
of Bankruptcy and houses.
Case Study 2. (Bill & Michelle
Johnson).
2 years ago Bill and Michelle bought a
townhouse in a nice 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 works in banking has a separate
job and no other debt aside from the mortgage. Bill cannot pay his debts
therefore he is reviewing Bankruptcy. Michelle is bothered that she too may
need to declare bankruptcy or be forced into it due to the house loan.
Within this particular case 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 can do this in a few ways; 1. Have 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 be capable 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
challenging 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
Australia on 1300 795 575, or head to our website: www.bankruptcy-australia.net.au
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