The most significant worry numerous people have with Bankruptcy is without a doubt ‘Can I manage to retain my home?’ and it might be complicated, but in some cases it is achievable.
The only reason where you will be obliged to sell your family house when you declare bankruptcy is if you have equity in the home so that it is considered an asset. But how does this work? What is equity? Just how much equity can make it an asset? We get the inquiries all the time about Bankruptcy. So below are a few good examples to demonstrate to you how all of it works and help you understand Bankruptcy. Remember if you want to know more concerning Bankruptcy and residential properties don’t hesitate to get in contact with us here at Bankruptcy Experts Gold Coast on 1300 795 575, or check out our website: www.bankruptcyexpertsgoldcoast.com.au
Case Study 1. (Tanya & Matt).
5 years ago Matt and Tanya bought a house in a mining town, they moved there for their job during the mining boom and so prices were higher, and life looked great. Having said that recently the work has dried up, prices have dropped and their debt has just kept increasing. Now they are needing to look at Bankruptcy because of significant liabilities and mortgage.
They purchased the house for $450,000, and they have $80,000 in other unpaid debts.
They definitely want to keep their home but question if they could. They know that residential property prices, if anything, have dropped 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 researched www.realestate.com.au sold section of the site to see what various other houses in the streets close by have sold for lately.
Over the past 5 years they have just been repaying the interest, so they currently owe the original $450,000.
Current House Value = $450,000.
Current Mortgage Value = $450,000.
Net Equity Value = $0.
Because there is no equity in this specific residential property the trustee will not ask Tanya and Matt to sell their home when they declare bankruptcy, provided that they maintain the mortgage payments then all will be fine for them for the 3 years they remain in insolvency.
By the end of the bankruptcy period of time the trustee will write to them and inquire if they want to take over ownership of their home again and provided that it has not grown in price over the 3 years they have been insolvent they will be asked to make an offer to have their home back. This is usually somewhere around $3,000 and $5,000 to cover the legal costs of changing the land title deed etc. This was a rather simple sample to show how a house may be considered by a trustee when there is no equity involved.
Case Study 2. (Bill & Michelle Johnson).
2 years ago Bill and Michelle bought a townhouse in a nice suburb of Gold Coast for $850,000. They tipped in $50,000 as a down payment and now the townhouse two years later is valued at $900,000.
Current House Value = $900,000.
Current Mortgage Value = $800,000.
Net Equity Value = $100,000.
Due to a recent business issue Bill is about $240,000 in the red. Michelle who carries out work in banking has a separate job and no other debt besides the home mortgage. Bill can not pay out his debts so he is taking a look at Bankruptcy. Michelle is concerned that she too may have to file for insolvency or be driven into it due to the home loan.
Within this specific case the trustee is required to gain access to or get their hands on Bill’s half of the equity which is $50,000 less marketing costs. They might accomplish this in a couple of ways; 1. Have them sell off the house. 2. Welcome Michelle to buy Bills half of the equity. 3. leave them in the house – but it’s quite unlikely with this scenario that the trustee will be happy to leave Bill and Michelle in the home since there is just a lot of equity.
So Michelle might have the capacity to purchase Bill’s percentage of the equity by coming up with $50,000 and buying out Bills’ half and from that moment its now 100 % Michelle’s property.
Property and Bankruptcy in Australia is confusing and complicated. These two examples above are just the tip of the iceberg as far as your options in Gold Coast are concerned. If you should know much more about Bankruptcy and residential properties feel free to get in touch with us here at Bankruptcy Experts Gold Coast on 1300 795 575, or have a look at our website: www.bankruptcyexpertsgoldcoast.com.au.