Easily the most significant issue numerous people have with Bankruptcy is without a doubt ‘Will I manage to keep my house?’ and it can be complicated, but sometimes it is achievable.
The only justification where you will be required to sell your family house when you declare insolvency 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 makes it an asset? We get the problems frequently about Bankruptcy. So below are a few instances to demonstrate to you how all of it works and really help you learn about Bankruptcy. Remember if you wish to know more regarding Bankruptcy and residential properties don’t hesitate to get in touch with us here at Bankruptcy Experts Gympie on 1300 795 575, or check out our website: www.bankruptcyexpertsgympie.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 and so prices were high, and life appeared great. Having said that in recent years the work has dried up, prices have dropped and their financial debt has just kept growing. Now they are having to look at Bankruptcy as a result of considerable debts and home mortgage.
They bought the house for $450,000, and they have $80,000 in other debts.
They really want to keep their house but question if they can. They know that house prices, if anything, have gone down 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 section of the site to see what other properties in the streets close by have sold for lately.
Over the past 5 years they have solely been paying off the interest, so they currently 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 particular residential property the trustee will not ask Tanya and Matt to sell their house when they go bankrupt, as long as they maintain the mortgage repayments then all will be well for them for the 3 years they remain in bankruptcy.
By the end of the bankruptcy time period the trustee will write to them and inquire if they want to take over ownership of their home again and provided that it has not increased in price over the 3 years they have been insolvent they will be asked to make an offer to have their house back. This is generally somewhere around $3,000 and $5,000 to cover the legal costs of modifying the land title deed etc. This was a pretty 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 Gympie 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.
Due to a recent business issue Bill is about $240,000 in the red. Michelle who carries out work in banking has a separate job and no other debt apart from the home loan. Bill can not pay out his financial obligations so he is having a look at Bankruptcy. Michelle is concerned that she too may have to file for bankruptcy or be driven into it due to the home loan.
Here in this particular case the trustee is required to access or get their hands on Bill’s share of the equity which is $50,000 less marketing costs. They could accomplish this in a couple of ways; 1. Have them sell the home. 2. Invite Michelle to buy Bills half of the equity. 3. keep them in the house – but it’s very improbable with this situation that the trustee will be happy to keep Bill and Michelle in the house because there is just a lot of equity.
So Michelle might have the capability to purchase Bill’s share of the equity by coming up with $50,000 and buying out Bills’ half and from that moment its now 100 % Michelle’s property.
Property and Bankruptcy in Australia is complex and tricky. These two case studies above are simply the tip of the iceberg as far as your options in Gympie are concerned. If you should know more about Bankruptcy and houses feel free to get in touch with us here at Bankruptcy Experts Gympie on 1300 795 575, or have a look at our website: www.bankruptcyexpertsgympie.com.au.