The most considerable concern numerous people have with Bankruptcy is without a doubt ‘Will I manage to retain my home?’ and it might be complicated, but occasionally it is achievable.
The only good reason where you will be required to sell your family home when you declare insolvency is if you have equity in the home so that it is thought as an asset. But how does this work? What is equity? How much equity can make it an asset? We get the concerns constantly about Bankruptcy. So here are a few scenarios to show you how it all works and help you understand Bankruptcy. Keep in mind if you want to know more relating to Bankruptcy and residential properties don’t hesitate to get in contact with us here at Bankruptcy Experts Penrith on 1300 795 575, or check out our website: www.bankruptcyexpertspenrith.com.au
Case Study 1. (Tanya & Matt).
5 years ago Matt and Tanya bought a house in a mining town, they moved there for work throughout the mining boom and so prices were high, and life appeared good. However recently the work has dried up, prices have gone down and their debt has just kept increasing. Now they are having to take a look at Bankruptcy due to significant liabilities and home mortgage.
They bought the home for $450,000, and they have $80,000 in other debts.
They definitely want to keep their home but wonder if they could. They know that house prices, if anything, have declined in the region 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 various other properties in the streets close by have sold for most recently.
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.
Considering that there is no equity in this particular property the trustee will not ask Tanya and Matt to sell their home when they go bankrupt, as long as they keep up the mortgage repayments then all will be well for them for the 3 years they are in bankruptcy.
At the end of the bankruptcy time period the trustee will write to them and inquire if they wish to take control of ownership of their property again and provided that 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 normally somewhere between $3,000 and $5,000 to pay for the legal expenses of changing the land title deed etc. This was a fairly simple scenario to show how a house may be taken into consideration 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 residential area of Penrith for $850,000. They tipped in $50,000 as a down payment 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.
Because of a recent business complication Bill is about $240,000 in debt. Michelle who does work in banking has a separate job and no other financial debts besides the home mortgage. Bill can not pay out his debts so he is taking a look at Bankruptcy. Michelle is worried that she too may have to file for insolvency or be driven into it as a result of the home loan.
Here in this particular case the trustee is required to access or get their hands on Bill’s share of the equity which is $50,000 less marketing costs. These professionals could do this in a few ways; 1. Have them sell off the house. 2. Invite Michelle to purchase Bills half of the equity. 3. keep them in the house – but it’s very unlikely with this case that the trustee will be happy to keep Bill and Michelle in the home as there is just too much equity.
So Michelle might have the capacity to acquire Bill’s percentage of the equity by coming up with $50,000 and buying out Bills’ fifty percent and from that moment its now 100 % Michelle’s home.
Property and Bankruptcy in Australia is difficult to understand and complicated. These two examples above are just the tip of the iceberg as far as your options in Penrith are concerned. If you must know more about Bankruptcy and houses don’t hesitate to contact us here at Bankruptcy Experts Penrith on 1300 795 575, or check out our website: www.bankruptcyexpertspenrith.com.au.