Bankruptcy And The Family Home

Can I Keep My House
With No Equity?

Bob and Sue live in Victoria and own their family home. Times have not been good and they have chosen to file for bankruptcy. They are terribly worried about what will happen to their house. In this particular case study, we will take a look at what actually occurs in Victoria when you declare bankruptcy with a home without any equity in it.

Bob and Sue’s house is presently valued at $700,000 and the mortgage owing to the bank is also $700,000 meaning that they have no equity in their house. So, what will actually happen to Bob and Sue’s house now that they are going to declare bankruptcy?

House Has $30k or more in equity.

House Has $30k or More in Equity

Bob and Sue have made the very difficult decision to declare bankruptcy, the biggest concern is their family home on which they have a mortgage for $670,000. Their house is valued at $700,000 so they have $30,000 equity in the property. So, in Victoria, what will happen to their house when they apply for bankruptcy? In this case study we can consider the equity as anything above $30,000 so this would be the same scenario as if their equity was $30,000, $100,000, $300,000 or $1,000,000 it doesn’t make any difference the principle is the same.
House Has $30k or more in equity.

House Is Owned By
One Partner
?

There is a general assumption in Victoria that if a property is owned by one partner in a relationship that is not going bankrupt then the house is safe if the other partner declares bankruptcy. This is not the case and you need to be very careful about this assumption.

In this case study Bob and Sue have been married for 15 years but their house is solely in Sue’s name. Bob’s name is not on the title or on the mortgage but they have both resided in the property for the entire 15 years they have been together. Bob is needing to file for bankruptcy.

Surrendering the House to the Bank.

Bob and Sue have come to the hard decision to file for bankruptcy and they are considering what to do with the house as they have no equity in it and they simply cannot afford the mortgage any longer.

So, Bob and Sue choose to surrender their home to the bank. The very first thing we at Bankruptcy Experts Wangaratta would do for them is get them to sign a legal document which is like a deed of release meaning they have voluntarily surrendered their home.

surrendering the house to bank

Selling the House to a Family Member Prior to Bankruptcy, Is It Legal?

Bob and Sue are coming to the realisation that at some point in the future they will probably need to file for bankruptcy but they own their family home. Bob and Sue are thinking of possibly selling the house prior to declaring bankruptcy so that they don’t lose the money from the sale of the property when they declare bankruptcy. The question we often get asked here at Bankruptcy Experts Wangaratta is whether that is legal to do or are you doing something wrong.
A Question of Caveats

A Question of Caveats

Bob and Sue have owned a property for many years, have worked really hard and have $200,000 equity in their home. Their home is valued at $700,000 and they currently have about $500,000 on their mortgage.

Bob is a builder in Vic and has really been struggling due to the fact that he injured his back. He owes $150,000 in unpaid accounts to a particular hardware store who have been very patient with Bob and are aware of his situation.

A Question of Caveats

Names on House Titles

In Victoria the name or names on the title of a property are really important in bankruptcy, however, it is not the be all and end all. For instance, some of our clients call and ask if they can change who is on the title of their property to attempt to protect that property before they go bankrupt. In this case of Bob and Sue, Sue owns the house and needs to declare bankruptcy and she has some equity in the house. They do not want to lose the house so to protect it Bob and Sue decide that Sue should transfer the title to Bob’s name and take her name off of the property.
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Big 5 Questions

– Is Going Bankrupt Right for me?
– Will I lose my job?
– How will my income be affected?
– Can I keep my house or car?
– Will I lose my business or can I still be self-employed?

If you are considering bankruptcy, being able to answer these questions is vital. Then you’ll know exactly what will happen to your business and assets should you choose to file for bankruptcy. Feel free to download our eBook for free and inform yourself today. Or, if your questions are more complex, call us directly on 1300 795 575.

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When The House is in Your Partners Name and They Don’t Need to Go Bankrupt.

Bob is seriously thinking about bankruptcy and feels like he has no choice. He has grave concerns due to the fact that his wife Sue owns the Wangaratta home that they reside in and he is really concerned about what will happen to that property should he file for Bankruptcy. In this case study we explore what happens to the property when the house is purely in Sue’s name and Bob’s name is neither on the title nor on the home mortgage.
When The House is in Your Partners Name, and They Don’t Need to go Bankrupt.

When the House Is In Your Name, You Need To Go Bankrupt And Your Partner Has Contributed To The House.

In the following case studies we look into the implications when one partner who owns the property declares bankruptcy. Does the other partner who is not on the title have any claim to keep some of the equity in the property?

Bob owns a Wangaratta house worth $700,000 he owes the bank $600,000 and as a result has $100,000 equity in the property. Bob now needs to go bankrupt and he’s really worried about losing his house when he files for bankruptcy, especially considering his partner Sue has been contributing financially towards mortgage payments for the last 5 years.

Why would you go bankrupt if you had equity in your house?

Why Would You Go Bankrupt If You Had Equity In Your House?

Bob and Sue have owned their Wangaratta home for many years and have actually worked really hard to build up some equity in the property. Their house is presently valued at $700,000 and they owe the bank $600,000 giving them $100,000 equity. In this case study Bob and Sue have a combined debt of $180,000, far greater than the $100,000 equity they have in their house.
Why would you go bankrupt if you had equity in your house?

Can I Sell My House To A Family Member Before I Go Bankrupt ?

This is a question that, on the surface of it, sounds terribly dangerous, however it is not if you know what you are doing and things are done in an appropriate commercial manner.

Let us say Bob and Sue own a property worth $700,000 and they owe $650,000 on the mortgage. They desperately wish to hold on to the Wangaratta property as it has some nostalgic value and some practical implications as Sue’s grandmother resides in a granny flat out the back and their disabled daughter requires the wheelchair access set up at the property.

But I Have Mortgage Insurance?

Five years ago when Bob and Sue were aiming to buy a home in Victoria all they could manage to pull together was a deposit of 5%. When they purchased their house they went to the bank and the bank was fine with the 5% deposit but they needed to also pay for mortgage insurance coverage. Bob and Sue were happy to pay the mortgage insurance since they didn’t have the required 20% deposit to eliminate paying mortgage insurance premiums and it meant that they could buy a home sooner.
But I Have Mortgage Insurance?

What If My Partner Wants To Buy My Share of the Property When I go Bankrupt?

Bob needs to go bankrupt however his partner Sue does not. They own a Wangaratta house together worth $700,000 and they have $100,000 equity in the home. Bob has actually realised that he can no longer afford to contribute to paying the mortgage on the property and is needing to go bankrupt. Sue on the other hand does not wish to lose the family home that they have worked so hard to keep.

Bob and Sue need to know if there is any way when Bob declares bankruptcy that Sue can potentially buy out Bob’s interest in the property and keep their home. The answer is yes, possibly. When Bob goes bankrupt Sue can approach the bankruptcy trustee and offer to make a payment of $50,000 for Bob’s half of the equity in the property. The $50,000 may potentially be a little less or a little more depending on the trustee and what the market value of the house is. But approximately $50,000 is what Sue will need to pay to settle the home and keep it in her name.

I Have Heard My Property Can Be Tied Up for Eight Years or More When I Go Bankrupt

I Have Heard My Property Can Be Tied Up for Eight Years or More When I Go Bankrupt?

Let us take a look at under what circumstance your house could be tied up for more than the 3 year minimum bankruptcy period. Let us say that when Bob and Sue went bankrupt they decided that they wanted to try and keep their Wangaratta house after bankruptcy. At the time they declared bankruptcy the house was worth $700,000 and they still owed the bank the entire $700,000. As there was no equity in the house at this time the trustee decided not to take any further action regarding the property. Bob and Sue could remain living in the property as long as they keep making the mortgage payments. Their life will go on with the house to be re-evaluated at the end of the 3 year bankruptcy period.
I Have Heard My Property Can Be Tied Up for Eight Years or More When I Go Bankrupt

What If I Can Not Keep Paying the Mortgage Halfway Through My Bankruptcy ?

Bob and Sue went bankrupt eighteen months ago without any equity in their family home. They had made a decision they would try to keep the property so that at the end of the three years they had somewhere to live. However, after a year Bob lost his job due to illness and Sue then got retrenched from her work. This meant that they no longer had any capacity to continue to pay the mortgage. In this case it is fairly straightforward, Bob and Sue contact the trustee and the bank and let them know that they can no longer afford to make the payments on the mortgage and that they will be moving out.

What If I Decide to Hand the House Back to the Bank When I Go Bankrupt, How Long Do I Have Before I Am Required to Leave?

Bob and Sue have struck a couple of financial obstacles and have made a decision to declare bankruptcy. They cannot afford to maintain the mortgage payments and so have decided to walk away from their family home. The question is, when bankrupt how long have Bob and Sue got before they will be required to leave the property?
Bankruptcy Experts - Case Study -  What if i decide to hand the house back to the bank when i go bankrupt, how long do i have before i need to leave?

Surely I Can Keep
The Family Home
If I Go Bankrupt?

Bob and Sue have finally faced the reality of declaring bankruptcy and they, like a great deal of people confronting bankruptcy, are thinking surely we will not lose our family home, we need to live somewhere.

Sadly in lots of bankruptcy situations, as we have seen in these case studies, keeping your home is not an easy process. Sometimes it is simply not possible. Keeping your home in bankruptcy is all about the money, it is not about the sentimental value, emotional value or your own specific circumstances it is an extremely cut and dry process.

What If My House Was Purchased With an Inheritance?

Bob and Sue have been residing in their Wangaratta family house for five years and about two years ago Sue inherited a large sum of money from her Aunty June. Bob and Sue decided to put the inheritance money into their mortgage to help them pay off their home.

The question is, if Sue puts her inheritance money towards their property, is that money safe if Bob and Sue decide they need to file for bankruptcy? In Victoria the answer to that question is no, it is not safe at all.

What if i purchase my house

I Bought a House With Compensation Money, Is That Money Safe If I Go Bankrupt?

Bob and Sue have been living in their family house for several years. About five years ago Bob had a serious accident at work, he received a large compensation payout from his employer which he put into the house mortgage. The question is, if Bob makes a decision to declare bankruptcy is that compensation money safe or will he lose it?
I bought a house with Compensation Money is it safe If I go bankrupt?

Will I Still Have to Pay Rates, Insurance and Body Corp If I Go Bankrupt?

Bob and Sue are filing for bankruptcy and have come to the heart-breaking decision to leave their Wangaratta property as they have no equity in it. They are going to hand it back to the bank however the question is will they still be liable to pay the rates and insurance after they hand the house back.

On the day they file for bankruptcy Bob and Sue will no longer continue to be the owners of their home. The bankruptcy trustee will generally remove Bob and Sue’s names from the title and put the trustee’s name in their place, then the house is simply handed back to the bank. Even if Bob and Sue had outstanding rates of $8,000 owing at the time of bankruptcy they will now not have to pay them and any overdue household debts will not impact them handing the house back to the bank.