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- December 28, 2016
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Easily the most significant concern numerous people have with Bankruptcy is without a doubt ‘Can I manage to keep my house?’ and it might be complicated, but sometimes it is possible.
The only good reason where you will be required to sell your family house when you declare insolvency is if you have equity in the home so that it is considered an asset. But exactly how does this work? What is equity? Just how much equity can make it an asset? We receive the inquiries constantly about Bankruptcy. So here are a few scenarios to show you how everything works and help you comprehend Bankruptcy. Keep in mind if you wish to know more regarding Bankruptcy and houses do not hesitate to get in touch with us here at Bankruptcy Experts Gladstone on 1300 795 575, or check out our website: www.bankruptcyexpertsgladstone.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 high, and life appeared good. Having said that recently the work has dried up, prices have gone down and their debt has just kept growing. Now they are having to look at Bankruptcy due to substantial personal debts and mortgage.
They purchased the home for $450,000, and they have $80,000 in other unpaid debts.
They really wish to keep their house but wonder if they could. They know that house prices, if anything, have declined in the area 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 section of the website to see what other homes in the streets close by have sold for most recently.
Over the past 5 years they have just been paying off 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 maintain the mortgage payments then all will be fine for them for the 3 years they are in insolvency.
By the end of the bankruptcy period of time the trustee will contact them and ask if they wish to take over ownership of their house again and provided that it has not increased 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 generally somewhere between $3,000 and $5,000 to cover the legal costs of modifying the land title deed etc. This was a pretty basic example to show 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 Gladstone 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.
As a result of a recent business issue Bill is about $240,000 in debt. Michelle who carries out work in banking has a separate job and no other financial obligations besides the mortgage. Bill can not pay out his financial obligations so he is taking a look at Bankruptcy. Michelle is worried that she too may need to file for insolvency or be driven into it as a result of the home loan.
Within this specific instance the trustee is required to access or get their hands on Bill’s half of the equity which is $50,000 less selling costs. These professionals might accomplish this in a few ways; 1. Have them sell the house. 2. Welcome Michelle to buy Bills half of the equity. 3. keep them in the house – but it’s very unlikely with this scenario that the trustee would be happy to leave Bill and Michelle in the home considering that there is just a lot of 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 house.
Property and Bankruptcy in Australia is challenging and tricky. These two examples above are simply the tip of the iceberg as far as your options in Gladstone are concerned. If you need to know much more about Bankruptcy and houses don’t hesitate to contact us here at Bankruptcy Experts Gladstone on 1300 795 575, or have a look at our website: www.bankruptcyexpertsgladstone.com.au.