Easily the most considerable issue many have with Bankruptcy is without a doubt ‘Will I manage to retain my house?’ and it might be complicated, but occasionally it is achievable.
The only justification where you will be obliged to sell your family house when you declare insolvency is if you have equity in the home so that it is thought as an asset. But exactly how does this work? What is equity? How much equity can make it an asset? We receive the problems constantly about Bankruptcy. So here are a few good examples to show you how everything works and help you learn about Bankruptcy. Bear in mind if you want to know more concerning Bankruptcy and houses do not hesitate to get in touch with us here at Bankruptcy Experts Adelaide on 1300 795 575, or check out our website: www.bankruptcyexpertsadelaide.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 therefore prices were higher, and life looked good. Having said that recently the work has dried up, prices have gone down and their financial debt has just kept increasing. Now they are needing to take a look at Bankruptcy as a result of significant personal debts and mortgage.
They bought the house for $450,000, and they have $80,000 in various other unpaid debts.
They definitely wish to keep their home but wonder if they could. They know that residential property prices, if anything, have gone down in the area in the last 5 years so to be safe they think that their house is at present only worth $450,000 after all these years. To make sure they browsed www.realestate.com.au sold category of the site to see what other properties in the streets close by have sold for most recently.
Over the past 5 years they have just been paying off the interest, so they currently owe the initial $450,000.
Current House Value = $450,000.
Current Mortgage Value = $450,000.
Net Equity Value = $0.
Because there is no equity in this specific property the trustee will not ask Tanya and Matt to sell their home when they declare bankruptcy, provided that 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 amount of time the trustee will write to them and ask if they wish to take control of ownership of their home 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 get their house back. This is generally somewhere between $3,000 and $5,000 to pay for the legal expenses of modifying the land title deed etc. This was a fairly basic sample to demonstrate how a home 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 suburb of Adelaide for $850,000. They tipped in $50,000 as a deposit 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.
Because of a recent business issue Bill is about $240,000 in debt. Michelle who does work in banking has a different job and no other personal debts besides the mortgage. Bill can not pay his financial debts so he is having a look at Bankruptcy. Michelle is worried that she too may need to file for bankruptcy or be driven into it as a result of the home loan.
Here in this specific case the trustee is required to gain access to or get their hands on Bill’s share of the equity which is $50,000 less selling expenses. These professionals might do this in a few ways; 1. Have them sell off the house. 2. Welcome Michelle to buy Bills half of the equity. 3. keep them in the house – but it’s quite improbable in this instance that the trustee will be happy to leave Bill and Michelle in the home since there is simply too much equity.
So Michelle may have the ability to purchase Bill’s share of the equity by coming up with $50,000 and buying out Bills’ half and from that time its now 100 % Michelle’s house.
Property and Bankruptcy in Australia is challenging and tricky. These two case studies above are just the tip of the iceberg as far as your options in Adelaide are concerned. If you should know more about Bankruptcy and houses do not hesitate to get in touch with us here at Bankruptcy Experts Adelaide on 1300 795 575, or take a look at our website: www.bankruptcyexpertsadelaide.com.au.