The most significant concern many have with Bankruptcy is without a doubt ‘Can I manage to keep my house?’ and it might be complicated, but sometimes it is achievable.
The only justification where you will be obliged to sell your family house when you declare insolvency is if you have equity in the home so that it is thought as an asset. But exactly how does this work? What is equity? Just how much equity makes it an asset? We get the inquiries all the time about Bankruptcy. So here are a few scenarios to demonstrate to you how it all works and help you understand Bankruptcy. Bear in mind if you wish to know more regarding Bankruptcy and houses feel free to get in touch with us here at Bankruptcy Experts Fremantle on 1300 795 575, or check out our website: www.bankruptcyexpertsfremantle.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 throughout the mining boom and so prices were higher, and life seemed great. Having said that in recent years 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 home mortgage.
They bought the home for $450,000, and they have $80,000 in additional unpaid debts.
They really want to keep their house but question if they can. They know that house prices, if anything, have gone down in the town in the last 5 years so to be safe they believe that their house is presently only worth $450,000 after all these years. To make sure they searched www.realestate.com.au sold category of the site to see what various other properties in the streets nearby have sold for most recently.
Over the past 5 years they have only been repaying the interest, so they currently 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 residential property the trustee will not ask Tanya and Matt to sell their house when they go bankrupt, provided that they keep up the mortgage repayments then all will be fine for them for the 3 years they are in bankruptcy.
By the end of the bankruptcy amount of time the trustee will contact them and inquire if they want to take control of ownership of their home again and provided that it has not grown in price over the 3 years they have been insolvent 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 expenses of changing the land title deed etc. This was a fairly simple sample 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 Fremantle for $850,000. They tipped in $50,000 as a deposit 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.
Because of a recent business complication Bill is about $240,000 in debt. Michelle who does work in banking has a separate job and no other financial debts apart from the home mortgage. Bill can not pay his financial obligations so he is having a look at Bankruptcy. Michelle is worried that she too may have to file for bankruptcy or be driven into it due to the home loan.
Here in this specific case the trustee is required to access or get their hands on Bill’s half of the equity which is $50,000 less marketing fees. These professionals may carry this out in a few ways; 1. Have them sell off the home. 2. Invite Michelle to purchase Bills half of the equity. 3. leave them in the house – but it’s very improbable with this instance that the trustee will be happy to leave Bill and Michelle in the home because there is simply too much equity.
So Michelle might have the ability to acquire Bill’s percentage of the equity by coming up with $50,000 and buying out Bills’ fifty percent and from that time its now 100 % Michelle’s property.
Property and Bankruptcy in Australia is confusing and complicated. These two examples above are just the tip of the iceberg as far as your options in Fremantle are concerned. If you must know much more about Bankruptcy and residential properties feel free to speak to us here at Bankruptcy Experts Fremantle on 1300 795 575, or take a look at our website: www.bankruptcyexpertsfremantle.com.au.