The main question people have when they
come to our business about Bankruptcy is undoubtedly 'Can I manage to keep my
house?' and in some cases the answer is yes, you can keep your house.
The only reason you may be compelled to
sell your family home if you file for bankruptcy is due to the fact that you
have a lot of equity in the home that it is believed an asset. Please go over
these straightforward hypothetical case studies below to get your head around Bankruptcy
and how it has an effect on houses in Australia. Remember If you want to know
more about Bankruptcy and houses feel free to get in touch with us here at
Bankruptcy Experts Brisbane on 1300 795 575, or head to our website:
www.bankruptcyexpertsBrisbane.com.au
Case Study 1. (Mike & Sue Smith).
5 years ago Mike and Sue purchased a house
in a mining town for $450,000. At this time the mining boom was helping keep
all the property prices nice and high. Now they are needing to look at Bankruptcy
given that they have massive debts of $80,000 on top of their mortgage and
credit card and tax debt.
They really wish to keep their house but
wonder if they can, they know that house prices if anything have gone down in
the area in the last 5 years so to be safe they think that their house is
currently only worth $450,000 after all these years, to make sure they searched
www.realestate.com.au/ sold section of the website to see what other houses in
the streets close by have sold for lately.
Unfortunately they have not paid any
principal of the home loan over the last 5 years, mainly just interest, so they
still owe $450,000.
Current House Value = $450,000.
Current Mortgage Value = $450,000.
Net Equity Value = $0.
Because there is no equity in this
particular property the trustee will not ask Mike and Sue to sell their home
when they go bankrupt, as long as they keep up the mortgage payments then all
will be well for them for the 3 years they are in bankruptcy.
At the end of the bankruptcy period the
trustee will write to them and ask if they would like to take over ownership of
their house again and as long as it has not increased 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 usually somewhere between $3,000 and $5,000 to cover the legal
costs of changing the land title deed etc.
Now let's take a look at a slightly
different example of Bankruptcy and houses.
Case Study 2. (Bill & Michelle
Johnson).
2 years ago Bill and Michelle purchased a
townhouse in a lovely suburb of Brisbane 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.
As a result of a recent business downfall
Bill is about $240,000 in debt. Michelle who does work in banking has a
separate job and no other debt except for the mortgage. Bill cannot pay his
debts so he is taking a look at Bankruptcy. Michelle is worried that she too
may need to declare bankruptcy or be forced into it because of the house loan.
With this particular case the trustee is
required to access or get their hands on Bill's part of the equity which is
$50,000 less selling costs. They may do this 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 improbable in this case that the trustee would be
happy to leave Bill and Michelle in the house because there is just too much
equity.
So Michelle may have the chance to purchase
Bill's share of the equity by coming up with $50,000 and buying out Bills' half
and from that moment its now 100 % Michelle's house.
Property and Bankruptcy in Australia is
challenging and demanding, these two case studies above are just the tip of the
iceberg as far as your options in Brisbane are concerned. If you need to know
more about Bankruptcy and houses feel free to call us here at Bankruptcy
Experts Brisbane on 1300 795 575, or go to our website:
www.bankruptcyexpertsBrisbane.com.au.
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