The greatest concern a lot of people have
when they come to our company about Bankruptcy is undoubtedly 'Can I manage to
keep my house?' and sometimes the truth is yes, you can keep your house.
The only reason you may be driven to sell
your family home when you declare bankruptcy is because you have a lot of
equity in the house that it is considered an asset. Please go through these
simple 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 contact us here at Bankruptcy Experts Perth
on 1300 795 575, or check out our website: www.bankruptcyexpertsPerth.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 keeping all the
property prices nice and high. Now they are needing to look at Bankruptcy
because they have huge 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 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.
Unfortunately 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 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 as long as it has not increased 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 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 wonderful suburb of Perth 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 aside from the mortgage. Bill cannot pay his debts and so
he is reviewing Bankruptcy. Michelle is concerned that she too may need to file
for 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 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 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
confusing and complicated, these two case studies above are just the tip of the
iceberg as far as your options in Perth are concerned. If you need to know more
about Bankruptcy and houses feel free to consult with us here at Bankruptcy
Experts Perth on 1300 795 575, or go to our website:
www.bankruptcyexpertsPerth.com.au.
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