The most considerable issue many have with Bankruptcy is without a doubt ‘Can I manage to keep my home?’ and it may be complicated, but occasionally it is possible.
The only good reason 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 looked as an asset. But how does this work? What is equity? Just how much equity makes it an asset? We get the questions constantly about Bankruptcy. So below are a few scenarios to demonstrate to you how everything works and really help you comprehend Bankruptcy. Remember if you wish to know more concerning Bankruptcy and residential properties feel free to get in touch with us here at Bankruptcy Experts Tennant Creek on 1300 795 575, or check out our website: www.bankruptcyexpertstennantcreek.com.au
Case Study 1. (Tanya & Matt)
5 years ago Matt and Tanya purchased a house in a mining town, they relocated there for work during the mining boom therefore prices were higher, and life looked great. However recently the work has dried up, prices have gone down and their financial debt has just kept growing. Now they are needing to take a look at Bankruptcy due to substantial liabilities and home mortgage.
They purchased the home for $450,000, and they have $80,000 in additional debts.
They really wish 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 currently 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 houses in the streets close by have sold for most recently.
Over the past 5 years they have solely 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.
Because there is no equity within this specific property the trustee will not ask Tanya and Matt to sell their home when they go bankrupt, so long as they keep up the mortgage repayments then all will be well for them for the 3 years they remain in bankruptcy.
At the end of the insolvency amount of time the trustee will write to them and inquire if they wish to take over ownership of their property again and provided that it has not grown 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 typically somewhere between $3,000 and $5,000 to cover the legal fees of modifying the land title deed etc. This was a fairly simple example to demonstrate 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 suburb of Tennant Creek 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 complication Bill is about $240,000 in the red. Michelle who does work in banking has a different job and no other financial obligations besides the home loan. Bill can not pay out his financial debts so he is taking 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.
In this particular case the trustee is required to access or get their hands on Bill’s half of the equity which is $50,000 less selling costs. They might carry this out in a couple of ways; 1. Have them sell the house. 2. Invite Michelle to purchase Bills half of the equity. 3. keep them in the house – but it’s very improbable in this scenario that the trustee will be happy to leave Bill and Michelle in the home considering that there is simply too much equity.
So Michelle might have the capability to purchase Bill’s percentage of the equity by coming up with $50,000 and buying out Bills’ fifty percent and from that moment its now 100 % Michelle’s property.
Property and Bankruptcy in Australia is difficult to understand and complicated. These two case studies above are simply the tip of the iceberg as far as your options in Tennant Creek are concerned. If you should know much more about Bankruptcy and houses feel free to contact us here at Bankruptcy Experts Tennant Creek on 1300 795 575, or check out our website: Insolvency Tennant Creek