Easily the most significant worry many have with Bankruptcy is without a doubt ‘Can I manage to retain my home?’ and it can be complicated, but occasionally it is attainable.
The only justification where you will be required to sell your family residence when you declare bankruptcy is if you have equity in the home so that it is considered an asset. But how does this work? What is equity? How much equity can make it an asset? We receive the inquiries all the time about Bankruptcy. So here are a few examples to demonstrate to you how everything works and help you understand Bankruptcy. Keep in mind if you want to know more relating to Bankruptcy and houses do not hesitate to get in contact with us here at Bankruptcy Experts Shepparton on 1300 795 575, or check out our website: www.bankruptcyexpertsshepparton.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 therefore prices were high, and life appeared great. However in recent years the work has dried up, prices have gone down and their debt has just kept growing. Now they are having to look at Bankruptcy because of considerable debts and mortgage.
They purchased the house for $450,000, and they have $80,000 in other debts.
They really wish to keep their home but wonder if they can. They know that house prices, if anything, have gone down in the region in the last 5 years so to be safe they think that their home is at present only worth $450,000 after all these years. To make sure they researched www.realestate.com.au sold section of the website to see what other houses in the streets nearby have sold for lately.
Over the past 5 years they have solely been paying off the interest, so they still 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 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 remain in bankruptcy.
At the end of the insolvency time period the trustee will contact them and inquire if they wish to take over 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 requested to make an offer to have their home back. This is generally somewhere around $3,000 and $5,000 to pay for the legal costs of changing the land title deed etc. This was a rather basic sample 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 Shepparton 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 personal debts apart from the home mortgage. Bill can not pay out his debts so he is having a look at Bankruptcy. Michelle is concerned that she too may have to file for insolvency or be driven into it as a result of the house loan.
Within this specific instance the trustee is required to access or get their hands on Bill’s share of the equity which is $50,000 less marketing expenses. These professionals may do this in a few ways; 1. Have them sell the home. 2. Ask Michelle to purchase Bills half of the equity. 3. leave them in the house – but it’s quite improbable in this instance that the trustee would be happy to keep Bill and Michelle in the house considering that there is simply too much equity.
So Michelle might have the ability to purchase Bill’s percentage 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 challenging and tricky. These two case studies above are just the tip of the iceberg as far as your options in Shepparton are concerned. If you must know more about Bankruptcy and houses feel free to get in touch with us here at Bankruptcy Experts Shepparton on 1300 795 575, or take a look at our website: www.bankruptcyexpertsshepparton.com.au.