The main question a lot of people have when they come to our team regarding Going Bankrupt is simply ‘Can I keep my house?’ and in many cases the truth is yes, you can keep your house.
The only reason you can be required to sell your family home if you file for bankruptcy is actually because you have so much equity in the home that it is believed an asset. Please go through these simple hypothetical case studies below to get your head around Going Bankrupt and how it has an effect on houses in Australia. Remember If you need to know more regarding Going Bankrupt and houses feel free to call us here at Bankruptcy Experts Mackay on 1300 795 575, or head to our website: http://www.bankruptcyexpertsMackay.com.au
Case Study 1. (Mike & Sue Smith)
5 years ago Mike and Sue purchased a house in a mining town for $450,000. At this time the mining boom was helping keep all the property prices nice and high. Now they are needing to look at Going Bankrupt considering they have huge debts of $80,000 on top of their mortgage and credit card and tax debt.
They really wish 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 currently only worth $450,000 after all these years, to make sure they searched http://www.realestate.com.au/ sold section of the website to see what other homes in the streets close by have sold for fairly recently.
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 property when they go bankrupt, as long as they keep up the mortgage payments then all will be well for them for the 3 years they are in bankruptcy.
At the end of the bankruptcy period the trustee will write to them and ask if they would like to take over ownership of their house again and as long as 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 usually somewhere between $3,000 and $5,000 to cover the legal costs of altering the land title deed etc.
Now let’s have a look at a slightly different example of Going Bankrupt and houses.
Case Study 2. (Bill & Michelle Johnson)
2 years ago Bill and Michelle bought a townhouse in a great suburb of Mackay 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.
Due to a recent business problem Bill is about $240,000 in debt. Michelle who works in banking has a separate job and no other debt aside from the mortgage. Bill cannot pay his debts therefore he is considering Going Bankrupt. Michelle is concerned that she too may need to file for bankruptcy or be forced into it because of 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 can do this in a few ways; 1. Have them sell the home. 2. Invite Michelle to buy Bills half of the equity. 3. leave them in the home – but It’s very improbable 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 have the chance 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 Going Bankrupt in Australia is challenging and complicated, these two case studies above are just the tip of the iceberg as far as your options in Mackay are concerned. If you need to know more about Going Bankrupt and houses feel free to contact us here at Bankruptcy Experts Mackay on 1300 795 575, or go to our website: http://www.bankruptcyexpertsMackay.com.au.