The most significant worry many have with Bankruptcy is without a doubt ‘Will I manage to keep my home?’ and it might be complicated, but sometimes it is possible.
The only good reason 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? How much equity can make it an asset? We get the problems all the time about Bankruptcy. So here are a few scenarios to show you how everything works and help you learn about Bankruptcy. Remember if you wish to know more concerning Bankruptcy and residential properties feel free to get in contact with us here at Bankruptcy Experts Dubbo on 1300 795 575, or check out our website: www.bankruptcyexpertsdubbo.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 high, and life seemed good. Having said that recently the work has dried up, prices have gone down and their debt has just kept increasing. Now they are having to take a look at Bankruptcy due to significant personal debts and home mortgage.
They bought the home for $450,000, and they have $80,000 in additional unpaid debts.
They definitely would like to keep their home but question if they can. They know that residential property prices, if anything, have declined in the area 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 searched www.realestate.com.au sold section of the site to see what various other homes in the streets nearby have sold for lately.
Over the past 5 years they have just been repaying 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 particular property the trustee will not ask Tanya and Matt to sell their house when they declare bankruptcy, as long as they keep up the mortgage payments then all will be fine for them for the 3 years they remain in bankruptcy.
By the end of the bankruptcy amount of time the trustee will write to them and ask if they wish to take control of ownership of their property 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 get their home back. This is generally somewhere between $3,000 and $5,000 to cover the legal expenses of changing the land title deed etc. This was a rather simple example to demonstrate how a home 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 Dubbo 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.
Due to 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 debts besides the home mortgage. Bill can not pay out his debts so he is taking a look at Bankruptcy. Michelle is worried that she too may need to file for bankruptcy or be driven into it because of the home loan.
Here in this specific case the trustee is required to gain access to or get their hands on Bill’s share of the equity which is $50,000 less marketing expenses. These professionals could do this in a few ways; 1. Have them sell the home. 2. Ask Michelle to buy Bills half of the equity. 3. keep them in the home – but it’s quite improbable with this case that the trustee would be happy to leave Bill and Michelle in the house because there is just a lot of equity.
So Michelle may have the capacity to purchase Bill’s share of the equity by coming up with $50,000 and buying out Bills’ fifty percent and from that moment its now 100 % Michelle’s house.
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 Dubbo are concerned. If you need to know much more about Bankruptcy and residential properties don’t hesitate to speak to us here at Bankruptcy Experts Dubbo on 1300 795 575, or check out our website: www.bankruptcyexpertsdubbo.com.au.