|December 28, 2016||Comments Closed|
Easily the most considerable concern many have with Bankruptcy is without a doubt ‘Will I manage to keep my house?’ and it may be complicated, but occasionally it is achievable.
The only reason 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 considered an asset. But 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 below are a few examples to show you how all of it works and really help you understand Bankruptcy. Keep in mind if you want to know more relating to Bankruptcy and houses feel free to get in contact with us here at Bankruptcy Experts Mount Isa on 1300 795 575, or check out our website: www.bankruptcyexpertsmountisa.com.au
Case Study 1. (Tanya & Matt).
5 years ago Matt and Tanya bought a house in a mining town, they moved there for work throughout the mining boom and so prices were higher, and life appeared good. Having said that recently the work has dried up, prices have dropped and their financial debt has just kept increasing. Now they are needing to look at Bankruptcy because of substantial liabilities and mortgage.
They bought the home for $450,000, and they have $80,000 in additional unpaid debts.
They really would like to keep their house but question if they could. They know that house prices, if anything, have gone down in the area in the last 5 years so to be safe they believe that their house is at present only worth $450,000 after all these years. To make sure they researched www.realestate.com.au sold category of the website to see what various other properties in the streets nearby have sold for most recently.
Over the past 5 years they have solely been repaying the interest, so they currently owe the initial $450,000.
Current House Value = $450,000.
Current Mortgage Value = $450,000.
Net Equity Value = $0.
Because there is no equity within this particular residential property the trustee will not ask Tanya and Matt to sell their house when they go bankrupt, so long as they maintain the mortgage repayments then all will be well for them for the 3 years they remain in personal bankruptcy.
At the end of the insolvency time period the trustee will write to them and inquire if they want to take control of ownership of their home again and provided that it has not grown in price over the 3 years they have been bankrupt they will be requested to make an offer to get their house back. This is generally somewhere around $3,000 and $5,000 to pay for the legal fees of modifying the land title deed etc. This was a fairly basic 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 Mount Isa 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.
Because of a recent business complication Bill is about $240,000 in debt. Michelle who carries out work in banking has a separate job and no other financial debts apart from the mortgage. Bill can not pay his financial debts so he is having a look at Bankruptcy. Michelle is worried that she too may have to file for bankruptcy or be driven into it as a result of the home loan.
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 fees. These professionals could accomplish this in a few ways; 1. Have them sell the house. 2. Ask Michelle to buy Bills half of the equity. 3. keep them in the house – but it’s very improbable in this scenario that the trustee would be happy to leave Bill and Michelle in the house considering that there is simply too much equity.
So Michelle might have the capacity to purchase 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 confusing and tricky. These two case studies above are simply the tip of the iceberg as far as your options in Mount Isa are concerned. If you need to know much more about Bankruptcy and houses don’t hesitate to speak to us here at Bankruptcy Experts Mount Isa on 1300 795 575, or check out our website: www.bankruptcyexpertsmountisa.com.au.