Easily the most considerable issue numerous people have with Bankruptcy is without a doubt ‘Can I manage to retain my home?’ and it can be complicated, but occasionally it is achievable.
The only reason where you will be required to sell your family house when you declare bankruptcy is if you have equity in the home so that it is thought as an asset. But how does this work? What is equity? Just how much equity can make it an asset? We get the questions constantly about Bankruptcy. So below are a few instances to demonstrate to you how all of it works and help you learn about Bankruptcy. Keep in mind if you wish to know more regarding Bankruptcy and houses don’t hesitate to get in contact with us here at Bankruptcy Experts Hobart on 1300 795 575, or check out our website: www.bankruptcyexpertshobart.com.au
Case Study 1. (Tanya & Matt).
5 years ago Matt and Tanya bought a house in a mining town, they relocated there for work during the mining boom therefore prices were high, and life looked good. However in recent times the work has dried up, prices have dropped and their debt has just kept growing. Now they are needing to look at Bankruptcy because of considerable financial obligations and home mortgage.
They purchased the home for $450,000, and they have $80,000 in various other debts.
They really wish to keep their home but question if they could. They know that house prices, if anything, have gone down in the region in the last 5 years so to be safe they believe that their house is currently only worth $450,000 after all these years. To make sure they searched www.realestate.com.au sold category of the website to see what other houses in the streets nearby have sold for most recently.
Over the past 5 years they have only been repaying 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 property the trustee will not ask Tanya and Matt to sell their home when they declare bankruptcy, so long as they maintain 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 amount of time the trustee will write to them and ask if they wish to take over ownership of their house 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 get their house back. This is normally somewhere around $3,000 and $5,000 to cover the legal expenses of changing the land title deed etc. This was a fairly simple scenario to show how a house may be taken into consideration 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 Hobart for $850,000. They tipped in $50,000 as a deposit 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.
As a result of 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 personal debts apart from the home loan. Bill can not pay his financial debts so he is having a look at Bankruptcy. Michelle is concerned that she too may have to file for insolvency or be driven into it due to the house loan.
In this particular 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 marketing expenses. These professionals might carry this out in a few ways; 1. Have them sell the home. 2. Ask Michelle to purchase Bills half of the equity. 3. leave them in the home – but it’s very improbable in this situation that the trustee would be happy to keep Bill and Michelle in the home because there is just a lot of equity.
So Michelle might have the capability to buy 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 house.
Property and Bankruptcy in Australia is confusing and complicated. These two examples above are simply the tip of the iceberg as far as your options in Hobart are concerned. If you should know more about Bankruptcy and residential properties do not hesitate to get in touch with us here at Bankruptcy Experts Hobart on 1300 795 575, or check out our website: www.bankruptcyexpertshobart.com.au.