Easily the most considerable issue many have with Bankruptcy is without a doubt ‘Can I manage to keep my home?’ and it might be complicated, but sometimes it is achievable.
The only reason where you will be required to sell your family home when you declare bankruptcy is if you have equity in the home so that it is looked as an asset. But exactly how does this work? What is equity? Just how much equity can make it an asset? We get the problems frequently about Bankruptcy. So below are a few instances to demonstrate to you how everything works and really help you comprehend Bankruptcy. Keep in mind if you wish to know more concerning Bankruptcy and residential properties don’t hesitate to get in touch with us here at Bankruptcy Experts Geraldton on 1300 795 575, or check out our website: www.bankruptcyexpertsgeraldton.com.au
Case Study 1. (Tanya & Matt).
5 years ago Matt and Tanya purchased a house in a mining town, they moved there for their job throughout the mining boom and so prices were high, and life seemed great. Having said that in recent times the work has dried up, prices have gone down and their financial debt has just kept increasing. Now they are having to look at Bankruptcy due to significant financial obligations and mortgage.
They bought the home for $450,000, and they have $80,000 in additional debts.
They definitely want to keep their house but question if they could. They know that house prices, if anything, have declined in the area in the last 5 years so to be safe they think that their house is presently only worth $450,000 after all these years. To make sure they researched www.realestate.com.au sold category 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 solely been paying off the interest, so they still owe the initial $450,000.
Current House Value = $450,000.
Current Mortgage Value = $450,000.
Net Equity Value = $0.
As there is no equity in this specific property the trustee will not ask Tanya and Matt to sell their house when they go bankrupt, so long as they keep up the mortgage payments then all will be fine for them for the 3 years they remain in insolvency.
At the end of the insolvency amount of time the trustee will write to them and inquire if they want to take control of 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 get their house back. This is generally somewhere between $3,000 and $5,000 to cover the legal costs of modifying the land title deed etc. This was a fairly simple scenario to demonstrate 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 residential area of Geraldton 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.
Due to a recent business complication Bill is about $240,000 in the red. Michelle who does work in banking has a separate job and no other debt besides the mortgage. Bill can not pay out his financial debts so he is having a look at Bankruptcy. Michelle is concerned that she too may need to file for insolvency or be driven into it due to the home loan.
In this particular 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 expenses. They could do this in a couple of ways; 1. Have them sell the house. 2. Welcome Michelle to purchase Bills half of the equity. 3. leave them in the home – but it’s quite unlikely with this scenario that the trustee would be happy to keep Bill and Michelle in the home because there is just a lot of equity.
So Michelle may have the capability to purchase Bill’s share of the equity by coming up with $50,000 and buying out Bills’ fifty percent and from that moment its now 100 % Michelle’s house.
Property and Bankruptcy in Australia is complex and tricky. These two examples above are simply the tip of the iceberg as far as your options in Geraldton are concerned. If you need to know much more about Bankruptcy and residential properties don’t hesitate to speak to us here at Bankruptcy Experts Geraldton on 1300 795 575, or have a look at our website: www.bankruptcyexpertsgeraldton.com.au.