The most significant concern many have with Bankruptcy is without a doubt ‘Can I manage to retain my home?’ and it might be complicated, but sometimes it is attainable.
The only good reason where you will be required to sell your family residence 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? How much equity can make it an asset? We receive the concerns frequently about Bankruptcy. So here are a few good examples to show you how it all works and really 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 Bunbury on 1300 795 575, or check out our website: www.bankruptcyexpertsbunbury.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. Having said that in recent years the work has dried up, prices have gone down and their debt has just kept increasing. Now they are needing to look at Bankruptcy due to substantial financial debts and mortgage.
They purchased the house for $450,000, and they have $80,000 in various other unpaid debts.
They definitely wish to keep their home but question if they could. They know that house prices, if anything, have declined in the region in the last 5 years so to be safe they think that their house is currently only worth $450,000 after all these years. To make sure they browsed www.realestate.com.au sold category of the website to see what other properties in the streets close by have sold for lately.
Over the past 5 years they have just been paying off the interest, so they still owe the initial $450,000.
Current House Value = $450,000.
Current Mortgage Value = $450,000.
Net Equity Value = $0.
Because there is no equity within this specific residential property the trustee will not ask Tanya and Matt to sell their home when they declare bankruptcy, so long as they keep up the mortgage payments then all will be fine for them for the 3 years they remain in bankruptcy.
At the end of the bankruptcy time period the trustee will contact them and ask if they want to take control of ownership of their house again and provided that it has not increased in price over the 3 years they have been insolvent they will be requested to make an offer to have their home back. This is normally somewhere around $3,000 and $5,000 to cover the legal fees of changing the land title deed etc. This was a fairly basic sample 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 suburb of Bunbury for $850,000. They tipped in $50,000 as a down payment 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.
Due to 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 debt besides the mortgage. Bill can not pay his financial obligations so he is taking a look at Bankruptcy. Michelle is worried that she too may need to file for insolvency or be driven into it because of the home loan.
Within this specific case the trustee is required to gain access to or get their hands on Bill’s share of the equity which is $50,000 less selling costs. These professionals might carry this out in a few ways; 1. Have them sell off the home. 2. Ask Michelle to purchase Bills half of the equity. 3. keep them in the home – but it’s very unlikely with this situation that the trustee would be happy to keep Bill and Michelle in the home considering that there is simply too much equity.
So Michelle might have the capability to acquire Bill’s percentage 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 complicated. These two examples above are simply the tip of the iceberg as far as your options in Bunbury are concerned. If you must know more about Bankruptcy and residential properties feel free to get in touch with us here at Bankruptcy Experts Bunbury on 1300 795 575, or take a look at our website: www.bankruptcyexpertsbunbury.com.au.