The biggest question people have when they
come to our company regarding Bankruptcy is literally 'Can I manage to keep my
house?' and sometimes the answer is yes, you can keep your house.
The only reason you can be forced to sell
your family home if you declare bankruptcy is actually due to the fact that you
have a great deal of equity in the home that it is considered an asset. Please
go over these basic hypothetical case studies below to get your head around Bankruptcy
and how it affects houses in Australia. Remember If you need to know more about
Bankruptcy and houses feel free to consult with us here at Fresh Start
Solutions Adelaide on 1300 818 575, or go to our website:
www.freshstartsolutions.com.au/bankruptcy-adelaide.com.au
Case Study 1. (Mike & Sue Smith)
5 years ago Mike and Sue bought a house in
a mining town for $450,000. At this time the mining boom was keeping all the
property prices nice and high. Now they are needing to look at Bankruptcy given
that they have massive debts of $80,000 on top of their mortgage and credit
card and tax debt.
They really want to keep their house but
wonder if they can, they know that house prices if anything have gone down in
the area in the last 5 years so to be safe they think that their home is still
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 lately.
Unfortunately they have not paid any
principal of the home loan over the last 5 years, mainly just interest, so they
still owe $450,000.
Current House Value = $450,000.
Current Mortgage Value = $450,000.
Net Equity Value = $0.
Because there is no equity in this property
the trustee will not ask Mike and Sue to sell their home when they go bankrupt,
as long as they keep up the mortgage payments then all will be well for these
people for the 3 years they are in bankruptcy.
At the end of the bankruptcy period of time
the trustee will write to them and ask if they wish to take over ownership of
their house again and as long as it has not grown in price over the 3 years
they have been bankrupt they will be asked to make an offer to have their house
back. This is typically somewhere between $3,000 and $5,000 to cover the legal
costs of changing the land title deed etc.
Now let's have a look at a slightly different
example of Bankruptcy and houses.
Case Study 2. (Bill & Michelle Johnson)
2 years ago Bill and Michelle purchased a
townhouse in a wonderful suburb of Adelaide 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.
Because of a recent business downfall Bill
is about $240,000 in debt. Michelle who does work in banking has a separate job
and no other debt except for the mortgage. Bill cannot pay his debts and so he
is considering Bankruptcy. Michelle is concerned that she too may need to
declare bankruptcy or be pushed into it thanks to the house loan.
Within this particular case the trustee is
required to access or get their hands on Bill's part of the equity which is
$50,000 less selling costs. They might do this in a few ways; 1. Make them sell
the home. 2. Invite Michelle to buy Bills half of the equity. 3. leave them in
the home - but It's very unlikely with this case that the trustee would be
happy to leave Bill and Michelle in the house because there is just too much
equity.
So Michelle may be capable 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 house.
Property and Bankruptcy in Australia is
confusing and demanding, these two case studies above are just the tip of the
iceberg as far as your options in Adelaide are concerned. If you need to know
more about Bankruptcy and houses feel free to call us here at Fresh Start
Solutions Adelaide on 1300 818 575, or head to our website:
www.freshstartsolutions.com.au/bankruptcy-adelaide.com.au.
