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 occasionally it is achievable.
The only good reason where you will be obliged to sell your family house when you declare bankruptcy is if you have equity in the home so that it is looked as an asset. But how does this work? What is equity? How much equity makes it an asset? We get the questions all the time about Bankruptcy. So here are a few instances to demonstrate to you how all of it works and help you comprehend Bankruptcy. Remember if you wish to know more regarding Bankruptcy and residential properties don’t hesitate to get in contact with us here at Bankruptcy Experts Wangaratta on 1300 795 575, or check out our website: www.bankruptcyexpertswangaratta.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 higher, and life looked great. Having said that recently the work has dried up, prices have dropped and their financial debt has just kept growing. Now they are having to take a look at Bankruptcy due to considerable personal debts and home mortgage.
They purchased the house for $450,000, and they have $80,000 in additional unpaid debts.
They really wish to keep their home but wonder if they could. They know that residential property prices, if anything, have dropped in the area in the last 5 years so to be safe they believe that their home is currently only worth $450,000 after all these years. To make sure they browsed www.realestate.com.au sold section of the website to see what various other properties in the streets close by have sold for recently.
Over the past 5 years they have only 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.
As there is no equity in this particular residential property the trustee will not ask Tanya and Matt to sell their house when they declare bankruptcy, provided that they maintain the mortgage payments then all will be well 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 ask if they want to take control of ownership of their house 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 have their home back. This is generally somewhere between $3,000 and $5,000 to pay for the legal fees of changing the land title deed etc. This was a rather basic example to demonstrate 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 suburb of Wangaratta 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 complication Bill is about $240,000 in the red. Michelle who does work in banking has a separate job and no other financial obligations besides the home mortgage. Bill can not pay out his financial obligations so he is having a look at Bankruptcy. Michelle is worried that she too may need to file for insolvency or be driven into it as a result of the house loan.
Within this specific case 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 couple of ways; 1. Have them sell off the house. 2. Welcome Michelle to purchase Bills half of the equity. 3. keep them in the home – but it’s very improbable with this scenario 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 share of the equity by coming up with $50,000 and buying out Bills’ half and from that time its now 100 % Michelle’s home.
Property and Bankruptcy in Australia is challenging and complicated. These two examples above are just the tip of the iceberg as far as your options in Wangaratta are concerned. If you must know more about Bankruptcy and residential properties feel free to speak to us here at Bankruptcy Experts Wangaratta on 1300 795 575, or check out our website: www.bankruptcyexpertswangaratta.com.au.