The most considerable issue many have with Bankruptcy is without a doubt ‘Can I manage to keep my home?’ and it can be complicated, but occasionally it is achievable.
The only good reason where you will be required to sell your family house when you declare insolvency 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 makes it an asset? We get the concerns all the time about Bankruptcy. So here are a few examples to show you how it all works and really help you understand Bankruptcy. Bear in mind if you wish to know more concerning Bankruptcy and houses don’t hesitate to get in touch with us here at Bankruptcy Experts Mildura on 1300 795 575, or check out our website: www.bankruptcyexpertsmildura.com.au
Case Study 1. (Tanya & Matt).
5 years ago Matt and Tanya bought a house in a mining town, they relocated there for their job during the mining boom therefore prices were higher, and life seemed good. However recently the work has dried up, prices have gone down and their debt has just kept growing. Now they are needing to take a look at Bankruptcy due to significant debts and home mortgage.
They bought the house for $450,000, and they have $80,000 in additional unpaid debts.
They definitely would like to keep their house but wonder if they could. They know that residential property prices, if anything, have declined in the region in the last 5 years so to be safe they believe that their home 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 properties in the streets close by have sold for recently.
Over the past 5 years they have just been paying off the interest, so they currently owe the original $450,000.
Current House Value = $450,000.
Current Mortgage Value = $450,000.
Net Equity Value = $0.
As there is no equity within this specific residential property the trustee will not ask Tanya and Matt to sell their home when they go bankrupt, so long as they keep up the mortgage repayments then all will be fine for them for the 3 years they are in bankruptcy.
At the end of the insolvency amount of time the trustee will contact 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 requested to make an offer to get their house back. This is normally somewhere between $3,000 and $5,000 to pay for the legal fees of changing the land title deed etc. This was a fairly basic scenario to demonstrate how a home 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 Mildura 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 financial debts apart from the home loan. Bill can not pay his financial 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 due to the home loan.
Here in this particular instance the trustee is required to gain access to or get their hands on Bill’s share of the equity which is $50,000 less marketing expenses. These professionals may accomplish this in a few ways; 1. Have them sell off the home. 2. Invite Michelle to buy Bills half of the equity. 3. keep them in the house – but it’s very improbable with this case that the trustee will be happy to keep Bill and Michelle in the house considering that there is simply too much equity.
So Michelle may have the ability to buy 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 challenging and complicated. These two examples above are just the tip of the iceberg as far as your options in Mildura are concerned. If you need to know much more about Bankruptcy and residential properties do not hesitate to get in touch with us here at Bankruptcy Experts Mildura on 1300 795 575, or take a look at our website: www.bankruptcyexpertsmildura.com.au.