The most significant worry many have with Bankruptcy is without a doubt ‘Will I manage to retain my house?’ and it might be complicated, but sometimes it is attainable.
The only reason where you will be required 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 how does this work? What is equity? How much equity makes it an asset? We receive the concerns constantly about Bankruptcy. So here are a few good examples to show you how everything works and help you understand Bankruptcy. Bear in mind if you wish to know more relating to Bankruptcy and residential properties feel free to get in touch with us here at Bankruptcy Experts Gosford on 1300 795 575, or check out our website: www.bankruptcyexpertsgosford.com.au
Case Study 1. (Tanya & Matt).
5 years ago Matt and Tanya purchased a house in a mining town, they relocated there for work during the mining boom therefore prices were high, and life looked great. However in recent years the work has dried up, prices have dropped and their debt has just kept increasing. Now they are needing to take a look at Bankruptcy as a result of substantial liabilities and home mortgage.
They bought the house for $450,000, and they have $80,000 in various other unpaid debts.
They definitely would like to keep their home but question if they could. They know that house prices, if anything, have dropped in the area in the last 5 years so to be safe they believe that their house is currently only worth $450,000 after all these years. To make sure they researched www.realestate.com.au sold section of the website to see what other properties in the streets close by have sold for lately.
Over the past 5 years they have only 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 within this particular property the trustee will not ask Tanya and Matt to sell their house when they declare bankruptcy, so long as they keep up the mortgage repayments then all will be fine for them for the 3 years they are in insolvency.
At the end of the insolvency period of time the trustee will contact them and inquire if they wish 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 requested to make an offer to get 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. This was a fairly simple sample to show how a home may be taken into consideration 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 Gosford for $850,000. They tipped in $50,000 as a deposit and now the townhouse two years later is valued at $900,000.
Current House Value = $900,000.
Current Mortgage Value = $800,000.
Net Equity Value = $100,000.
Because 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 debts besides the mortgage. Bill can not pay out his financial obligations so he is taking a look at Bankruptcy. Michelle is worried that she too may need to file for bankruptcy or be driven into it due to the house loan.
Here in this specific instance the trustee is required to access or get their hands on Bill’s share of the equity which is $50,000 less selling fees. They might do this in a few ways; 1. Have them sell the home. 2. Welcome Michelle to buy Bills half of the equity. 3. keep them in the house – but it’s quite unlikely in this instance that the trustee will be happy to leave Bill and Michelle in the house because there is just too much equity.
So Michelle may have the capacity to acquire Bill’s percentage of the equity by coming up with $50,000 and buying out Bills’ half and from that time its now 100 % Michelle’s house.
Property and Bankruptcy in Australia is challenging and complicated. These two case studies above are simply the tip of the iceberg as far as your options in Gosford are concerned. If you must know much more about Bankruptcy and residential properties do not hesitate to contact us here at Bankruptcy Experts Gosford on 1300 795 575, or check out our website: www.bankruptcyexpertsgosford.com.au.