The only reason you will likely be
compelled to sell your family home if you declare bankruptcy is due to the fact
that you have a lot 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 has an effect on houses in Australia.
Remember If you need to know more regarding Bankruptcy and houses feel free to
call us here at Bankruptcy Experts Sunshine Coast on 1300 795 575, or visit our
website: www.bankruptcyexpertsSunshineCoast.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
because they have substantial 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 house is still
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 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 property 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 the
trustee will write to them and ask if they would like 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 typically somewhere between $3,000 and $5,000 to cover the legal
costs of modifying 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 lovely suburb of Sunshine Coast 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.
Because of a recent business failure 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 looking into Bankruptcy. Michelle is bothered that she too may need to
declare bankruptcy or be driven into it because of 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. 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 able 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 complicated, these two case studies above are just the tip of
the iceberg as far as your options in Sunshine Coast are concerned. If you need
to know more about Bankruptcy and houses feel free to consult with us here at
Bankruptcy Experts Sunshine Coast on 1300 795 575, or head to our website: freshstartsolutions.com.au/bankruptcy-sunshinecoast
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