Will I Lose My Home To Bankruptcy
The most considerable concern numerous people have with Bankruptcy is without a doubt ‘Can I manage to keep my home?’ and it might be complicated, but in some cases it is possible.
The only reason where you will be obliged to sell your family home when you declare insolvency is if you have equity in the home so that it is looked as an asset. But exactly how does this work? What is equity? How much equity can make it an asset? We get the concerns all the time about Bankruptcy. So here are a few examples to demonstrate to you how all of it works and help you understand Bankruptcy. Keep in mind if you want to know more relating to Bankruptcy and residential properties don’t hesitate to get in touch with us here at Bankruptcy Experts Melbourne on 1300 795 575, or check out our website: www.bankruptcyexpertsmelbourne.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 during the mining boom and so prices were high, and life seemed good. Having said that in recent times the work has dried up, prices have dropped and their debt has just kept increasing. Now they are having to take a look at Bankruptcy because of substantial debts and mortgage.
They bought the house for $450,000, and they have $80,000 in other unpaid debts.
They really want to keep their house but question if they can. They know that house prices, if anything, have decreased in the town in the last 5 years so to be safe they think that their home is currently only worth $450,000 after all these years. To make sure they searched www.realestate.com.au sold category of the site to see what various other houses in the streets nearby have sold for most recently.
Over the past 5 years they have only 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 residential property the trustee will not ask Tanya and Matt to sell their home when they go bankrupt, so long as they keep up the mortgage repayments then all will be well for them for the 3 years they are in bankruptcy.
At the end of the bankruptcy period of time the trustee will contact them and inquire if they want to take control of ownership of their property again and provided that it has not grown in price over the 3 years they have been bankrupt they will be asked to make an offer to have their house back. This is normally somewhere around $3,000 and $5,000 to pay for the legal costs of modifying the land title deed etc. This was a fairly simple sample 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 suburb of Melbourne for $850,000. They tipped in $50,000 as a down payment and now the townhouse two years later is valued at $900,000.
Current House Value = $900,000.
Current Mortgage Value = $800,000.
Net Equity Value = $100,000.
Because of a recent business problem Bill is about $240,000 in the red. Michelle who does work in banking has a separate job and no other financial obligations apart from the mortgage. Bill can not pay his debts so he is having a look at Bankruptcy. Michelle is concerned that she too may need to file for insolvency or be driven into it due to the house loan.
Within this specific 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 could carry this out in a few ways; 1. Have them sell the home. 2. Invite Michelle to buy Bills half of the equity. 3. leave them in the home – but it’s very unlikely in this situation that the trustee would be happy to keep Bill and Michelle in the home considering that there is just a lot of equity.
So Michelle might have the ability 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 home.
Property and Bankruptcy in Australia is difficult to understand and complicated. These two examples above are simply the tip of the iceberg as far as your options in Melbourne are concerned. If you must know much more about Bankruptcy and residential properties feel free to get in touch with us here at Bankruptcy Experts Melbourne on 1300 795 575, or take a look at our website: www.bankruptcyexpertsmelbourne.com.au.