The most considerable worry many have with Bankruptcy is without a doubt ‘Can I manage to retain my home?’ and it can be complicated, but in some cases it is attainable.
The only reason where you will be obliged to sell your family home when you declare insolvency is if you have equity in the home so that it is looked as an asset. But exactly how does this work? What is equity? Just how much equity can make it an asset? We get the inquiries frequently about Bankruptcy. So below are a few examples to show you how everything works and help you understand Bankruptcy. Remember if you want to know more regarding Bankruptcy and residential properties do not hesitate to get in contact with us here at Bankruptcy Experts Port Stephens on 1300 795 575, or check out our website: www.bankruptcyexpertsportstephens.com.au
Case Study 1. (Tanya & Matt).
5 years ago Matt and Tanya bought a house in a mining town, they moved there for work during the mining boom therefore prices were high, and life seemed great. However in recent years the work has dried up, prices have dropped and their financial debt has just kept increasing. Now they are having to take a look at Bankruptcy due to significant financial debts and mortgage.
They purchased the home for $450,000, and they have $80,000 in various other debts.
They definitely wish to keep their house but wonder if they could. They know that house prices, if anything, have declined in the town 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 category of the site to see what other homes in the streets close by have sold for lately.
Over the past 5 years they have solely been repaying the interest, so they currently 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 particular property the trustee will not ask Tanya and Matt to sell their house when they declare bankruptcy, so long as they maintain the mortgage payments then all will be fine for them for the 3 years they are in personal bankruptcy.
By the end of the insolvency period of time the trustee will contact them and ask if they want to take control of ownership of their property again and provided that it has not grown in price over the 3 years they have been insolvent they will be asked to make an offer to get their house back. This is typically somewhere between $3,000 and $5,000 to cover the legal costs of changing the land title deed etc. This was a rather basic example to demonstrate how a home 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 residential area of Port Stephens for $850,000. They tipped in $50,000 as a down payment 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 problem Bill is about $240,000 in the red. Michelle who carries out work in banking has a separate job and no other financial obligations besides the home mortgage. Bill can not pay out his financial debts so he is having a look at Bankruptcy. Michelle is concerned that she too may need to file for bankruptcy or be driven into it due to the house loan.
Here in this specific situation the trustee is required to gain access to or get their hands on Bill’s half of the equity which is $50,000 less selling costs. They might do this in a couple of ways; 1. Have them sell off the house. 2. Welcome Michelle to buy Bills half of the equity. 3. keep them in the house – but it’s quite unlikely in this case that the trustee would be happy to keep Bill and Michelle in the home considering that there is just a lot of equity.
So Michelle might have the capability to buy Bill’s percentage of the equity by coming up with $50,000 and buying out Bills’ half and from that moment its now 100 % Michelle’s home.
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 Port Stephens are concerned. If you must know more about Bankruptcy and houses don’t hesitate to contact us here at Bankruptcy Experts Port Stephens on 1300 795 575, or check out our website: www.bankruptcyexpertsportstephens.com.au.