The primary concern people have when they
come to our company about Bankruptcy is simply 'Can I keep my house?' and in
some cases the truth is yes, you can manage to keep your house.
The only reason you will likely be required
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 house that it is regarded as an asset.
Please go through these simple hypothetical case studies below to get your head
around Bankruptcy and how it impacts houses in Australia. Remember If you have
to know more regarding Bankruptcy and houses feel free to get in touch with us
here at Fresh Start Solutions Australia on 1300 818 575, or head to our website:
www.freshstartsolutions.com.au/bankruptcy-Australia.com.au
Case Study 1. (Mike & Sue Smith)
5 years ago Mike and Sue purchased 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
because 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 be 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 fairly 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 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 want to take over ownership of
their house again and provided that 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 altering the land title deed etc.
Now let's take 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 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 does work in banking has a
separate job and no other debt aside from the mortgage. Bill cannot pay his
debts and so he is taking a look at Bankruptcy. Michelle is concerned that she
too may need to declare bankruptcy or be compelled into it because of the house
loan.
With 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 might 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 with 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 chance 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 Fresh Start
Solutions Australia on 1300 818 575, or go to our website:
www.freshstartsolutions.com.au/bankruptcy-Australia.com.au.
