The greatest concern a lot of people have
when they come to our business about Bankruptcy is undoubtedly 'Can I manage to
keep my house?' and in many cases the truth is yes, you can keep your house.
The only reason you can be forced to sell
your family home when you declare bankruptcy is due to the fact that you have a
lot of equity in the house that it is believed an asset. Please go over 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 consult with us here at Bankruptcy
Experts Wollongong on 1300 795 575, or check out our website:
www.bankruptcyexpertsWollongong.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 keeping 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 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 lately.
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 house 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 the
trustee will write to them and ask if they wish 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 typically somewhere between $3,000 and $5,000 to cover the legal
costs of modifying 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 bought a
townhouse in a lovely suburb of Wollongong 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.
Due to a recent business problem Bill is
about $240,000 in debt. Michelle who works in banking has a separate job and no
other debt except for the mortgage. Bill cannot pay his debts therefore he is
taking a look at Bankruptcy. Michelle is worried that she too may need to
declare bankruptcy or be pushed into it due to 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 can 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 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 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 Wollongong are concerned. If you need to know
more about Bankruptcy and houses feel free to contact us here at Bankruptcy
Experts Wollongong on 1300 795 575, or go to our website:
www.bankruptcyexpertsWollongong.com.au.
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