Easily the most considerable worry many have with Bankruptcy is without a doubt ‘Can I manage to keep my house?’ and it can be complicated, but occasionally it is possible.
The only justification where you will be required to sell your family residence when you declare insolvency 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 makes it an asset? We get the questions all the time about Bankruptcy. So below are a few instances to demonstrate to you how all of it works and really help you comprehend Bankruptcy. Remember if you wish to know more concerning Bankruptcy and houses don’t hesitate to get in touch with us here at Bankruptcy Experts Frankston on 1300 795 575, or check out our website: www.bankruptcyexpertsfrankston.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 during the mining boom therefore prices were higher, and life looked good. Having said that in recent years 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 considerable liabilities and home mortgage.
They bought the house for $450,000, and they have $80,000 in various other debts.
They really want to keep their house but question if they could. They know that residential property prices, if anything, have gone down 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 searched www.realestate.com.au sold section of the website to see what various other homes in the streets close by have sold for lately.
Over the past 5 years they have only 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.
As there is no equity in this specific residential property the trustee will not ask Tanya and Matt to sell their house when they go bankrupt, as long as they maintain the mortgage payments then all will be well for them for the 3 years they remain in personal bankruptcy.
At the end of the insolvency time period the trustee will write to them and ask 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 home back. This is generally somewhere around $3,000 and $5,000 to cover the legal fees of changing the land title deed etc. This was a rather basic example 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 Frankston 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.
Due to a recent business problem 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 financial obligations so he is having a look at Bankruptcy. Michelle is worried that she too may need to file for insolvency or be driven into it as a result of the home loan.
Here in this specific situation 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. They might do this in a few ways; 1. Have them sell off the home. 2. Ask Michelle to purchase Bills half of the equity. 3. keep them in the home – but it’s quite improbable in this instance that the trustee will be happy to leave Bill and Michelle in the house because there is just 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’ fifty percent and from that time its now 100 % Michelle’s property.
Property and Bankruptcy in Australia is difficult to understand and complicated. These two case studies above are just the tip of the iceberg as far as your options in Frankston are concerned. If you must know much more about Bankruptcy and residential properties do not hesitate to get in touch with us here at Bankruptcy Experts Frankston on 1300 795 575, or have a look at our website: www.bankruptcyexpertsfrankston.com.au.