|December 27, 2016||Comments Closed|
Easily the most considerable concern numerous people have with Bankruptcy is without a doubt ‘Can I manage to keep my home?’ and it can be complicated, but in some cases it is possible.
The only justification where you will be required to sell your family residence when you declare insolvency is if you have equity in the home so that it is thought as an asset. But exactly how does this work? What is equity? How much equity can make it an asset? We get the inquiries frequently about Bankruptcy. So here are a few instances to demonstrate to you how everything works and really help you learn about Bankruptcy. Bear in mind if you wish to know more regarding Bankruptcy and houses don’t hesitate to get in contact with us here at Bankruptcy Experts Bendigo on 1300 818 575, or check out our website: www.bankruptcyexpertsbendigo.com.au
Case Study 1. (Tanya & Matt).
5 years ago Matt and Tanya purchased a house in a mining town, they moved there for work throughout the mining boom therefore prices were high, and life looked good. However in recent years the work has dried up, prices have dropped and their debt has just kept increasing. Now they are having to look at Bankruptcy due to significant liabilities and mortgage.
They bought the house for $450,000, and they have $80,000 in other unpaid debts.
They really would like to keep their house but question if they can. They know that residential property prices, if anything, have dropped in the region in the last 5 years so to be safe they think that their home is presently only worth $450,000 after all these years. To make sure they researched www.realestate.com.au sold category of the site to see what other houses in the streets nearby have sold for lately.
Over the past 5 years they have only 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.
Considering that there is no equity within this specific property the trustee will not ask Tanya and Matt to sell their house when they declare bankruptcy, provided that they keep up the mortgage payments then all will be fine for them for the 3 years they remain in insolvency.
By the end of the insolvency period of time the trustee will write to them and inquire if they want 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 asked to make an offer to get their house back. This is typically somewhere between $3,000 and $5,000 to cover the legal expenses of changing the land title deed etc. This was a rather basic example to show 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 residential area of Bendigo 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.
Because of a recent business issue Bill is about $240,000 in debt. Michelle who carries out work in banking has a separate job and no other financial obligations besides the home loan. Bill can not pay his financial obligations so he is having a look at Bankruptcy. Michelle is worried that she too may need to file for bankruptcy or be driven into it as a result of the house loan.
Within this particular instance 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 few ways; 1. Have them sell off the home. 2. Ask Michelle to buy Bills half of the equity. 3. leave them in the home – but it’s quite improbable in this scenario that the trustee would be happy to leave Bill and Michelle in the house as there is just a lot of equity.
So Michelle may have the capability to buy 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 home.
Property and Bankruptcy in Australia is difficult to understand and tricky. These two examples above are just the tip of the iceberg as far as your options in Bendigo are concerned. If you need to know more about Bankruptcy and houses don’t hesitate to contact us here at Bankruptcy Experts Bendigo on 1300 818 575, or have a look at our website: www.bankruptcyexpertsbendigo.com.au.