The biggest concern people have when they
come to our business about Bankruptcy is normally 'Can I keep my house?' and
sometimes the truth is yes, you can manage to keep your house.
The only reason you are going to be
compelled to sell your family home when you declare bankruptcy is actually
because you have a lot of equity in the home that it is considered an asset.
Please go through these basic hypothetical case studies below to get your head
around Bankruptcy and how it affects 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 Alice Springs on 1300 795 575, or visit our website:
www.bankruptcyexpertsAliceSprings.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
given that they have massive 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 home 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 homes in
the streets nearby have sold for lately.
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 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 want to take over ownership of
their house again and as 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 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 Alice Springs 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 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 so he
is looking into Bankruptcy. Michelle is bothered that she too may need to file
for bankruptcy or be driven 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 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 unlikely 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
confusing and demanding, these two case studies above are just the tip of the
iceberg as far as your options in Alice Springs are concerned. If you need to
know more about Bankruptcy and houses feel free to consult with us here at
Bankruptcy Experts Alice Springs on 1300 795 575, or visit our website:
www.bankruptcyexpertsAliceSprings.com.au.
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