The most significant concern numerous people have with Bankruptcy is without a doubt ‘Will I manage to keep my home?’ and it can be complicated, but occasionally it is achievable.
The only justification where you will be obliged to sell your family residence when you declare bankruptcy is if you have equity in the home so that it is considered an asset. But exactly how does this work? What is equity? Just how much equity makes it an asset? We receive the inquiries constantly about Bankruptcy. So below are a few instances to demonstrate to you how all of it works and really help you learn about Bankruptcy. Remember if you want to know more regarding Bankruptcy and houses feel free to get in touch with us here at Bankruptcy Experts Toowoomba on 1300 795 575, or check out our website: www.bankruptcyexpertstoowoomba.com.au
Case Study 1. (Tanya & Matt)
5 years ago Matt and Tanya purchased a house in a mining town, they moved there for work during the mining boom therefore prices were high, and life looked good. However recently the work has dried up, prices have dropped and their debt has just kept increasing. Now they are needing to look at Bankruptcy as a result of considerable liabilities and mortgage.
They purchased the house for $450,000, and they have $80,000 in additional debts.
They really would like to keep their home but question 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 house is at present 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 other homes in the streets nearby have sold for most recently.
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 particular residential property the trustee will not ask Tanya and Matt to sell their home when they declare bankruptcy, as long as they keep up the mortgage payments then all will be well for them for the 3 years they are in personal bankruptcy.
By the end of the bankruptcy time period the trustee will contact them and inquire 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 requested to make an offer to have their house back. This is usually somewhere around $3,000 and $5,000 to cover the legal expenses of modifying the land title deed etc. This was a pretty simple sample 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 Toowoomba 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.
As a result of a recent business problem Bill is about $240,000 in the red. Michelle who carries out work in banking has a separate job and no other personal debts apart from the home mortgage. Bill can not pay out his debts so he is having a look at Bankruptcy. Michelle is worried that she too may have to file for insolvency or be driven into it due to the house loan.
Within 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 fees. They could do this in a couple of ways; 1. Have them sell the house. 2. Ask Michelle to purchase Bills half of the equity. 3. keep them in the home – but it’s very improbable with this situation that the trustee would be happy to leave Bill and Michelle in the house because there is just a lot of equity.
So Michelle might have the capacity 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 difficult to understand and tricky. These two case studies above are simply the tip of the iceberg as far as your options in Toowoomba are concerned. If you must know more about Bankruptcy and residential properties do not hesitate to get in touch with us here at Bankruptcy Experts Toowoomba on 1300 795 575, or take a look at our website: Bankruptcy Experts Toowoomba