The leading concern people have when they
come to our team regarding Bankruptcy is literally 'Can I manage to keep my
house?' and sometimes the answer is yes, you can manage to keep your house.
The only reason you can be compelled to
sell your family home when you declare bankruptcy is due to the fact that you
have a lot of equity in the home that it is deemed an asset. Please check out
these simple hypothetical case studies below to get your head around Bankruptcy
and how it affects houses in Australia. Remember If you need to know more
regarding Bankruptcy and houses feel free to call us here at Bankruptcy Experts
Gladstone on 1300 795 575, or visit our website:
www.bankruptcyexpertsGladstone.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 substantial 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.
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 property 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 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 changing 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 great suburb of Gladstone 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 does work in banking has a separate job
and no other debt aside from the mortgage. Bill cannot pay his debts and so he
is reviewing Bankruptcy. Michelle is worried that she too may need to file for
bankruptcy or be obliged into it thanks to the house loan.
With 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 might do this in a few ways; 1. Make 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 opportunity 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 complicated, these two case studies above are just the tip of
the iceberg as far as your options in Gladstone are concerned. If you need to
know more about Bankruptcy and houses feel free to get in touch with us here at
Bankruptcy Experts Gladstone on 1300 795 575, or visit our website:
www.bankruptcyexpertsGladstone.com.au.
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