The most considerable 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 possible.
The only justification 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 looked as an asset. But how does this work? What is equity? How much equity makes it an asset? We get the questions frequently about Bankruptcy. So below are a few good examples to demonstrate to you how it all works and really help you understand Bankruptcy. Bear in mind if you want to know more concerning Bankruptcy and residential properties feel free to get in contact with us here at Bankruptcy Experts Kalgoorlie on 1300 795 575, or check out our website: www.bankruptcyexpertskalgoorlie.com.au
Case Study 1. (Tanya & Matt).
5 years ago Matt and Tanya purchased a house in a mining town, they moved there for their job during the mining boom therefore prices were high, and life looked great. However in recent years the work has dried up, prices have gone down and their debt has just kept increasing. Now they are needing to take a look at Bankruptcy due to substantial liabilities and mortgage.
They bought the house for $450,000, and they have $80,000 in additional debts.
They really want to keep their house but question if they can. They know that house prices, if anything, have declined in the area in the last 5 years so to be safe they think that their home 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 properties in the streets nearby have sold for recently.
Over the past 5 years they have just been repaying the interest, so they still owe the original $450,000.
Current House Value = $450,000.
Current Mortgage Value = $450,000.
Net Equity Value = $0.
Considering that there is no equity within this specific residential property the trustee will not ask Tanya and Matt to sell their home when they declare bankruptcy, as long as they maintain the mortgage repayments then all will be well for them for the 3 years they remain in bankruptcy.
By the end of the bankruptcy period of time the trustee will contact them and inquire if they want 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 insolvent they will be asked to make an offer to get their house back. This is normally somewhere between $3,000 and $5,000 to pay for the legal expenses of modifying the land title deed etc. This was a pretty simple scenario to demonstrate how a home 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 Kalgoorlie for $850,000. They tipped in $50,000 as a down payment 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.
Due to a recent business problem Bill is about $240,000 in debt. Michelle who carries out work in banking has a separate job and no other financial obligations apart from the home mortgage. Bill can not pay out his financial obligations so he is having a look at Bankruptcy. Michelle is worried that she too may need to file for bankruptcy or be driven into it due to the house loan.
Here in this particular case the trustee is required to access or get their hands on Bill’s share of the equity which is $50,000 less marketing expenses. These professionals might accomplish this in a few ways; 1. Have them sell the home. 2. Invite Michelle to purchase Bills half of the equity. 3. keep them in the home – but it’s quite improbable in this case that the trustee will be happy to keep Bill and Michelle in the home because there is just a lot of equity.
So Michelle may have the capability to purchase Bill’s share of the equity by coming up with $50,000 and buying out Bills’ half and from that moment its now 100 % Michelle’s home.
Property and Bankruptcy in Australia is challenging and tricky. These two case studies above are just the tip of the iceberg as far as your options in Kalgoorlie are concerned. If you must know much more about Bankruptcy and residential properties feel free to speak to us here at Bankruptcy Experts Kalgoorlie on 1300 795 575, or check out our website: www.bankruptcyexpertskalgoorlie.com.au.