Bankruptcy And The Family Home

Can I Keep My House
With No Equity?

Bob and Sue reside in Tasmania and own their family home. Times have actually not been very good and they have decided to apply for bankruptcy. They are extremely worried about what will happen to their house. In this particular case study, we will look at what actually happens in Tasmania when you file for bankruptcy with a home with no equity in it.

Bob and Sue’s house is presently valued at $700,000 and the mortgage owing to the bank is also $700,000 meaning that they have no equity in their house. So, what will actually happen to Bob and Sue’s house now that they are going to declare bankruptcy?

House Has $30k or more in equity.

House Has $30k or More in Equity

Bob and Sue have made the very tough decision to apply for bankruptcy, the biggest concern is their family house on which they have a mortgage for $670,000. Their home is valued at $700,000 so they have $30,000 equity in the property.

So, in Tasmania, what will happen to their home when they file for bankruptcy? In this case study we can consider the equity as anything above $30,000 so this would be the same scenario as if their equity was $30,000, $100,000, $300,000 or $1,000,000 it doesn’t make any difference the principle is the same.

House Has $30k or more in equity.

House Is Owned By
One Partner
?

There is a general assumption in Tasmania that if a property is owned by one partner in a relationship that is not going bankrupt 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 entirely in Sue’s name. Bob’s name is not on the title or on the mortgage but they have both resided in the property for the whole 15 years they have been together. Bob is needing to file for bankruptcy.

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 Hobart would do for them is get them to sign a legal document which resembles a deed of release meaning they have voluntarily surrendered their house. This means the bank does not need to pursue legal action to have them removed from the house.

surrendering the house to bank

Selling the House to a Family Member Prior to Bankruptcy, Is It Legal?

Bob and Sue are coming to the realisation that at some point in the future they will probably need to apply for bankruptcy but they own their family home. Bob and Sue are thinking of possibly selling the house prior to declaring bankruptcy so that they don’t lose the money from the sale of the property when they go bankrupt. The question we often get asked here at Bankruptcy Experts Hobart is whether that is legal to do or are you doing something wrong.

A Question of Caveats

A Question of Caveats

Bob and Sue have owned a property for many years, have worked really hard and have $200,000 equity in their home. Their home is valued at $700,000 and they presently have about $500,000 on their mortgage.

Bob is a builder in TAS 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 outlet who have actually been really patient with Bob and are aware of his situation.

A Question of Caveats

Names on House Titles

In Tasmania the name or names on the title of a property are really important in bankruptcy, however, it is not the be all and end all. For instance, some of our clients call and ask if they can change who is on the title of their property to attempt to protect that property before they declare bankruptcy. In this case of Bob and Sue, Sue owns the house and needs to go bankrupt and she has some equity in the house. They don’t wish to lose the house so to safeguard it Bob and Sue decide that Sue should transfer the title to Bob’s name and take her name off of the property.

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Big 5 Questions

– Is Going Bankrupt Right for me?
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– How will my income be affected?
– Can I keep my house or car?
– Will I lose my business or can I still be self-employed?

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When The House is in Your Partners Name and They Don’t Need to Go Bankrupt.

Bob is seriously considering bankruptcy and believes that he has no choice. He has grave concerns because his wife Sue owns the Hobart house that they reside in and he is extremely worried about what will happen to that property should he declare 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.

When The House is in Your Partners Name, and They Don’t Need to go Bankrupt.

When the House Is In Your Name, You Need To Go Bankrupt And Your Partner Has Contributed To The House.

In the following case studies we explore the ramifications when one partner who owns the property applies for bankruptcy. Does the other partner who is not on the title have any claim to keep some of the equity in the property?

Bob owns a Hobart house worth $700,000 he owes the bank $600,000 and as a result has $100,000 equity in the property. Bob now needs to go bankrupt and he’s very worried about losing his house when he declares bankruptcy, especially considering his partner Sue has been contributing financially towards mortgage payments for the last five years.

Why would you go bankrupt if you had equity in your house?

Why Would You Go Bankrupt If You Had Equity In Your House?

Bob and Sue have owned their Hobart home for several years and have actually worked really hard to build up some equity in the property. Their home is presently 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.

Why would you go bankrupt if you had equity in your house?

Can I Sell My House To A Family Member Before I Go Bankrupt ?

This is a question that, on the surface of it, sounds terribly risky, however it is not if you understand what you are doing and things are done in an appropriate commercial manner.

Let us say Bob and Sue own a property worth $700,000 and they owe $650,000 on the mortgage. They desperately want to hold on to the Hobart property as it has some sentimental value and some practical implications as Sue’s grandmother resides in a granny flat out the back and their disabled daughter requires the wheelchair access installed at the property.

But I Have Mortgage Insurance?

Five years ago when Bob and Sue were aiming to purchase a home in Tasmania all they could manage to pull together was a deposit of 5%. When they bought their house they went to the bank and the bank was fine with the 5% deposit but they had to also pay for mortgage insurance coverage. Bob and Sue were happy to pay the mortgage insurance due to the fact that they didn’t have the required 20% deposit to eliminate paying mortgage insurance premiums and it meant that they could purchase a house earlier.

But I Have Mortgage Insurance?

What If My Partner Wants To Buy My Share of the Property When I go Bankrupt?

Bob needs to go bankrupt however his partner Sue does not. They own a Hobart house together worth $700,000 and they have $100,000 equity in the house. Bob has acknowledged that he can no longer afford to contribute to paying the mortgage on the property and is needing to go bankrupt. Sue on the other hand does not wish to lose the family home that they have worked so hard to keep.

Bob and Sue need to find out if there is any way when Bob declares bankruptcy that Sue can potentially buy out Bob’s interest in the property and retain their home. The answer is yes, possibly. When Bob goes bankrupt Sue can approach the bankruptcy trustee and offer to make a payment of $50,000 for Bob’s half of the equity in the property.

I Have Heard My Property Can Be Tied Up for Eight Years or More When I Go Bankrupt

I Have Heard My Property Can Be Tied Up for Eight Years or More When I Go Bankrupt?

Let us take a look at 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 Hobart home after bankruptcy. At the time they went bankrupt the house was worth $700,000 and they still owed the bank the full $700,000.

I Have Heard My Property Can Be Tied Up for Eight Years or More When I Go Bankrupt

What If I Can Not Keep Paying the Mortgage Halfway Through My Bankruptcy ?

Bob and Sue declared bankruptcy eighteen months ago with no equity in their family home. They had decided they would attempt to keep the property so that at the end of the three years they had somewhere to live. However, after a year Bob lost his job due to illness and Sue then got retrenched from her work. This meant that they no longer had any capability to continue to pay the mortgage. In this case it is quite straightforward, Bob and Sue contact the trustee and the bank and let them know that they can no longer afford to make the payments on the mortgage and that they will be moving out.

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 obstacles and have made a decision to go bankrupt. They cannot afford to keep up the mortgage payments and so have decided to walk away from their family house. The question is, when bankrupt how long have Bob and Sue got before they will be required to leave the property?

Bankruptcy Experts - Case Study -  What if i decide to hand the house back to the bank when i go bankrupt, how long do i have before i need to leave?

Surely I Can Keep
The Family Home
If I Go Bankrupt?

Bob and Sue have finally faced the reality of going bankrupt and they, like a great deal of people confronting bankruptcy, are thinking surely we will not lose our family home, we need to live somewhere.

Sadly, in many bankruptcy situations, as we have seen in these case studies, keeping your home is not an easy process. Many times it is simply not possible. Keeping your house in bankruptcy is all about the money, it is not about the nostalgic value, emotional value or your own particular circumstances it is an extremely cut and dry process.

What If My House Was Purchased With an Inheritance?

Bob and Sue have been living in their Hobart family house for five years and about two years ago Sue inherited a large amount of money from her Aunty June. Bob and Sue made a decision to put the inheritance money into their mortgage to help them pay off their home.

The question is, if Sue puts her inheritance money toward their property, is that money safe if Bob and Sue decide they need to file for bankruptcy? In Tasmania the answer to that question is no, it is not safe at all. Inheritances and inheritance money received prior to bankruptcy are still looked at as assets and as such are still exposed to the bankruptcy trustee.

What if i purchase my house

I Bought a House With Compensation Money, Is That Money Safe If I Go Bankrupt?

Bob and Sue have been residing in their family house 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 makes a decision to declare bankruptcy is that compensation money safe or will he lose it?

I bought a house with Compensation Money is it safe If I go bankrupt?

Will I Still Have to Pay Rates, Insurance and Body Corp If I Go Bankrupt?

Bob and Sue are applying for bankruptcy and have come to the heart-breaking decision to leave their Hobart property as they have no equity in it. They are going to hand it back to the bank but the question is will they still be liable to pay the rates and insurance after they hand the house back.

On the day they declare bankruptcy Bob and Sue will no longer continue to be the owners of their home. The bankruptcy trustee will normally remove Bob and Sue’s names from the title and put the trustee’s name in their place, then the house is simply handed back to the bank. Even if Bob and Sue had outstanding rates of $8,000 owing at the time of bankruptcy they will now not have to pay them and any overdue household debts will not impact them handing the house back to the bank.