The most significant concern a lot of
people have when they come to us regarding Bankruptcy is without a doubt 'Can I
manage to keep my house?' and sometimes the truth is yes, you can keep your
house.
The only reason you will be obliged to sell
your family home when you declare bankruptcy is because you have a great deal
of equity in the home that it is considered an asset. Please go over these
simple hypothetical case studies below to get your head around Bankruptcy and
how it impacts houses in Australia. Remember If you need to know more regarding
Bankruptcy and houses feel free to get in touch with us here at Bankruptcy
Experts Adelaide on 1300 795 575, or check out our website:
www.bankruptcyexpertsadelaide.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
considering they have substantial debts of $80,000 on top of their mortgage and
credit card and tax debt.
They really want 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 nearby have sold for recently.
Having said that 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 house
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 of time
the trustee will write to them and ask if they want to take over ownership of
their house 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 usually somewhere between $3,000 and $5,000 to cover the legal
costs of modifying the land title deed etc.
Now let's have a look at a slightly different
example of Bankruptcy and houses.
Case Study 2. (Bill & Michelle
Johnson).
2 years ago Bill and Michelle bought a
townhouse in a nice suburb of Adelaide 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 problem Bill
is about $240,000 in debt. Michelle who does work in banking has a separate job
and no other debt apart from the mortgage. Bill cannot pay his debts so he is
taking a look at Bankruptcy. Michelle is concerned that she too may need to
file for bankruptcy or be driven into it because of the house loan.
In 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 with 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 ability 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
confusing and complicated, these two case studies above are just the tip of the
iceberg as far as your options in Adelaide are concerned. If you need to know
more about Bankruptcy and houses feel free to contact us here at Bankruptcy
Experts Adelaide on 1300 795 575, or check out our website:
www.bankruptcyexpertsadelaide.com.au.
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