House Has $30k or More in Equity
There is a general assumption in Victoria that if a property is owned by one partner in a relationship that is not declaring bankruptcy then the house is safe if the other partner declares bankruptcy. This is not the case and you need to be extremely careful about this assumption. In this case study Bob and Sue have been married for 15 years but their home is solely in Sue’s name.
Surrendering the House to the Bank.
Bob and Sue have come to the hard decision to file for bankruptcy and they are considering what to do with the house as they have no equity in it and they simply cannot afford the mortgage any longer.
So, Bob and Sue choose to surrender their house to the bank. The very first thing we at Bankruptcy Experts Frankston would do for them is get them to sign a legal document which is like a deed of release meaning they have voluntarily surrendered their house.
A Question of Caveats
Bob and Sue have owned a property for several years, have worked really hard and have $200,000 equity in their house. Their house is valued at $700,000 and they presently have about $500,000 on their mortgage.
Bob is a builder in VIC and has really been struggling due to the fact that he injured his back. He owes $150,000 in overdue accounts to a particular hardware store who have been very patient with Bob and understand his situation.
When The House is in Your Partners Name and They Don’t Need to Go Bankrupt.
Bob is seriously thinking about bankruptcy and feels like he has no choice. He has serious concerns because his wife Sue owns the Frankston house that they live in and he is really concerned about what will happen to that property should he apply for Bankruptcy. In this case study we explore what happens to the property when the house is purely in Sue’s name and Bob’s name is neither on the title nor on the mortgage.
Why Would You Go Bankrupt If You Had Equity In Your House?
Bob and Sue have owned their Frankston home for several years and have actually worked really hard to build up some equity in the property. Their home is currently valued at $700,000 and they owe the bank $600,000 giving them $100,000 equity. In this case study Bob and Sue have a combined debt of $180,000, far greater than the $100,000 equity they have in their house.
But I Have Mortgage Insurance?
Five years ago when Bob and Sue were looking to buy a home in Victoria all they could manage to pull together was a deposit of 5%. When they bought their home they went to the bank and the bank was fine with the 5% deposit but they needed to also pay for mortgage insurance. Bob and Sue were happy to pay the mortgage insurance because they didn’t have the required 20% deposit to eliminate paying mortgage insurance premiums and it meant that they could purchase a home earlier.
I Have Heard My Property Can Be Tied Up for Eight Years or More When I Go Bankrupt?
Let us examine under what circumstance your house could be tied up for more than the three year minimum bankruptcy period. Let us say that when Bob and Sue went bankrupt they decided that they wished to try and keep their Frankston house after bankruptcy. At the time they went bankrupt the house was worth $700,000 and they still owed the bank the entire $700,000.
What If I Decide to Hand the House Back to the Bank When I Go Bankrupt, How Long Do I Have Before I Am Required to Leave?
Bob and Sue have struck a few financial hurdles and have decided to go bankrupt. They cannot afford to maintain the mortgage payments and so have chosen to walk away from their family home. The question is, when bankrupt how long have Bob and Sue got before they will be required to leave the property?
I Bought a House With Compensation Money, Is That Money Safe If I Go Bankrupt?
Bob and Sue have been residing in their family home for many years. About five years ago Bob had a serious accident at work, he got a big compensation payout from his employer which he put into the house mortgage. The question is, if Bob decides to apply for bankruptcy is that compensation money safe or will he lose it?