The main concern a lot of people have when
they come to our company regarding Bankruptcy is without a doubt 'Can I keep my
house?' and in some cases the answer is yes, you can manage to keep your house.
The only reason you are going to be obliged
to sell your family home when you file for bankruptcy is actually due to the
fact that you have a great deal of equity in the house that it is considered an
asset. Please go through these straightforward 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 call
us here at Bankruptcy Advice Adelaide on 1300 879 867, or head to our website:
www.bankruptcy-advice.com.au/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 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 house is
currently 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 nearby have sold for recently.
However 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
particular 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 of time
the trustee will write to them and ask if they wish to take over ownership of
their house again and so 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 take a look at a slightly
different example of Bankruptcy and houses.
Case Study 2. (Bill & Michelle
Johnson).
2 years ago Bill and Michelle bought 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.
As a result of a recent business problem
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 looking at Bankruptcy. Michelle is bothered that she too may
need to file for bankruptcy or be compelled into it due 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 may 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 in 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 able 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 consult with us here at
Bankruptcy Advice Adelaide on 1300 879 867, or go to our website:
www.bankruptcy-advice.com.au/adelaide.com.au.
