The primary question people have when they
come to our company about Bankruptcy is certainly 'Can I manage to keep my
house?' and in many cases the truth is yes, you can keep your house.
The only reason you can be driven to sell
your family home when you declare bankruptcy is because you have so much equity
in the home that it is viewed as an asset. Please go through these basic
hypothetical case studies below to get your head around Bankruptcy and how it
has an effect on houses in Australia. Remember If you have to know more
regarding Bankruptcy and houses feel free to contact us here at Bankruptcy
Experts Hobart on 1300 795 575, or visit our website:
www.bankruptcyexpertsHobart.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 helping keep 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 still
only worth $450,000 after all these years, to be sure they searched
www.realestate.com.au/ sold section of the website to see what other homes in
the streets nearby have sold for recently.
Having said that 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 house
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 time period
the trustee will write to them and ask if they would like 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 typically somewhere between $3,000 and $5,000 to
cover the legal costs of modifying 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 nice suburb of Hobart 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 downfall Bill is
about $240,000 in debt. Michelle who works in banking has a separate job and no
other debt apart from the mortgage. Bill cannot pay his debts so he is taking a
look at Bankruptcy. Michelle is worried that she too may need to declare
bankruptcy or be forced into it because of the house loan.
In this particular case the trustee is
required to access or get their hands on Bill's half of the equity which is
$50,000 less selling costs. They can 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 in this particular 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 ability 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
challenging and demanding, these two case studies above are just the tip of the
iceberg as far as your options in Hobart are concerned. If you need to know
more about Bankruptcy and houses feel free to contact us here at Bankruptcy
Experts Hobart on 1300 795 575, or visit our website:
www.bankruptcyexpertsHobart.com.au.
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