The most significant issue many have with Bankruptcy is without a doubt ‘Can I manage to retain my house?’ and it can be complicated, but sometimes it is possible.
The only justification where you will be required to sell your family home when you declare bankruptcy 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? Just how much equity can make it an asset? We get the concerns constantly about Bankruptcy. So here are a few instances to demonstrate to you how all of it works and help you understand Bankruptcy. Keep in mind if you wish to know more concerning Bankruptcy and houses feel free to get in contact with us here at Bankruptcy Experts Port Macquarie on 1300 795 575, or check out our website: www.bankruptcyexpertsportmacquarie.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 during the mining boom and so prices were higher, and life looked good. However in recent years the work has dried up, prices have gone down and their debt has just kept growing. Now they are needing to look at Bankruptcy because of considerable financial debts and home mortgage.
They purchased the home for $450,000, and they have $80,000 in other unpaid debts.
They definitely want to keep their house 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 believe that their home is currently only worth $450,000 after all these years. To make sure they researched www.realestate.com.au sold section of the site to see what various other homes in the streets close by have sold for most recently.
Over the past 5 years they have only been paying off the interest, so they still owe the original $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 residential property the trustee will not ask Tanya and Matt to sell their house 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 insolvency.
By the end of the bankruptcy amount of time the trustee will write to them and ask if they want to take over ownership of their home 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 house back. This is usually somewhere around $3,000 and $5,000 to cover the legal costs of modifying the land title deed etc. This was a fairly basic scenario to show how a home may be taken into consideration 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 Port Macquarie 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.
Because of a recent business issue Bill is about $240,000 in the red. Michelle who carries out work in banking has a different job and no other debt apart from the home loan. Bill can not pay out his financial debts 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 because of the house loan.
Here in this particular case the trustee is required to access or get their hands on Bill’s half of the equity which is $50,000 less selling fees. They may do this in a couple of ways; 1. Have them sell off the home. 2. Invite Michelle to buy Bills half of the equity. 3. leave them in the house – but it’s quite improbable in this case that the trustee would be happy to keep Bill and Michelle in the home because there is simply a lot of equity.
So Michelle may have the capability 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 simply the tip of the iceberg as far as your options in Port Macquarie are concerned. If you need to know much more about Bankruptcy and residential properties do not hesitate to get in touch with us here at Bankruptcy Experts Port Macquarie on 1300 795 575, or check out our website: www.bankruptcyexpertsportmacquarie.com.au.