The most significant concern 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 attainable.
The only reason where you will be obliged to sell your family house when you declare bankruptcy 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 receive the problems constantly about Bankruptcy. So here are a few instances to demonstrate to you how all of it works and really help you comprehend Bankruptcy. Bear in mind if you wish to know more regarding Bankruptcy and residential properties feel free to get in touch with us here at Bankruptcy Experts Wyong on 1300 795 575, or check out our website: www.bankruptcyexpertswyong.com.au
Case Study 1. (Tanya & Matt).
5 years ago Matt and Tanya purchased a house in a mining town, they moved there for their job throughout the mining boom therefore prices were higher, and life looked great. Having said that in recent times the work has dried up, prices have dropped and their debt has just kept increasing. Now they are having to take a look at Bankruptcy due to significant personal debts and mortgage.
They bought the house for $450,000, and they have $80,000 in other debts.
They definitely wish to keep their home but question if they could. They know that residential property prices, if anything, have declined in the region in the last 5 years so to be safe they believe 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 various other properties in the streets nearby have sold for lately.
Over the past 5 years they have solely been paying off 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 within this particular property the trustee will not ask Tanya and Matt 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 remain in bankruptcy.
By the end of the bankruptcy period of time the trustee will contact them and ask if they wish to take control of ownership of their home again and provided that it has not grown in price over the 3 years they have been insolvent they will be requested to make an offer to get their home back. This is usually somewhere between $3,000 and $5,000 to cover the legal expenses of changing the land title deed etc. This was a fairly basic example to demonstrate how a house may be considered 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 Wyong 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 issue Bill is about $240,000 in the red. Michelle who does work in banking has a separate job and no other personal debts apart from the home mortgage. Bill can not pay his financial debts so he is having a look at Bankruptcy. Michelle is worried that she too may need to file for insolvency or be driven into it due to the house loan.
In this specific situation 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 may do this in a few 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 very improbable with this situation that the trustee will be happy to leave Bill and Michelle in the house considering that there is just too much equity.
So Michelle might have the capability to acquire Bill’s share of the equity by coming up with $50,000 and buying out Bills’ fifty percent and from that time its now 100 % Michelle’s property.
Property and Bankruptcy in Australia is complex and tricky. These two examples above are simply the tip of the iceberg as far as your options in Wyong are concerned. If you need to know more about Bankruptcy and residential properties don’t hesitate to get in touch with us here at Bankruptcy Experts Wyong on 1300 795 575, or have a look at our website: www.bankruptcyexpertswyong.com.au.