The biggest concern people have when they
come to our business regarding Bankruptcy is undoubtedly 'Can I keep my house?'
and in some cases the answer is yes, you can keep your house.
The only reason you may be obliged to sell
your family home if you declare bankruptcy is due to the fact that you have a
lot of equity in the home that it is regarded as an asset. Please read through
these straightforward hypothetical case studies below to get your head around Bankruptcy
and how it impacts houses in Australia. Remember If you want to know more
regarding Bankruptcy and houses feel free to call us here at Bankruptcy Experts
Canberra on 1300 795 575, or head to our website: www.bankruptcyexpertsCanberra.com.au
Case Study 1. (Mike & Sue Smith).
5 years ago Mike and Sue bought 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
since 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 home is still
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 recently.
However 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 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 these
people for the 3 years they are in bankruptcy.
At the end of the bankruptcy period of time
the trustee will write to them and ask if they would like to take over
ownership of their house again and so long as 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 typically somewhere between $3,000 and $5,000 to
cover the legal costs of altering the land title deed etc.
Now let's 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 Canberra 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.
Because of a recent business failing Bill
is about $240,000 in debt. Michelle who does work in banking has a separate job
and no other debt other than the mortgage. Bill cannot pay his debts so he is
reviewing Bankruptcy. Michelle is concerned that she too may need to file for
bankruptcy or be compelled into it as a result of the house loan.
Within this particular case the trustee is
required to access or get their hands on Bill's half 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 unlikely in this particular 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 be capable 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 Canberra are concerned. If you need to know
more about Bankruptcy and houses feel free to contact us here at Bankruptcy
Experts Canberra on 1300 795 575, or head to our website:
www.bankruptcyexpertsCanberra.com.au.
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